Card associations weigh co-branding merits. (cross marketing credit cards with merchant credit cards)

Despite the fact that many of the same banks are owner/members of both Visa U.S.A. and MasterCard International, the two national bank card organizations remain fierce competitors for card-based transaction volume share. What's more intriguing, though, are the associations' policy differences concerning alliances their members seek to form with the merchant community.

A current example is the question of whether or not to "co-brand" the Visa or MasterCard product with merchants' private-label cards or other proprietary cards. Co-branding, to give one example, means placing the Visa or MasterCard logo on a department store's own credit card. Thus the card has a double identity--or two brands.

At first glance, the arrangement benefits all the parties involved--merchants, issuing banks, and the card organizations.

The merchants benefit by offering their customers a payment option associated with a nationally recognized payment system; banks earn transaction fees and may gain new accounts in many cases; and Visa and MasterCard can claim to handle a greater volume of transactions in the marketplace.

Both banks and the card associations also can gain valuable marketing information on a new group of cardholders.

"Every issuer's goal is to acquire accounts," says Patti McCoy, senior vice-president and director…