The Big Two: Visa vs. MasterCard

With Visa and MasterCard's competing claims of market dominance and market penetration, one would think that these business rivals were worlds apart. Yet the reality is far from that, with their business models being practically identical. In fact, as you will see, the differences between the card may have far more to do with the bank you get your card from then the company itself.

Twin Giants: MasterCard and Visa

Visa and MasterCard work very similarly in the manner in which their credit cards are distributed, their fees collected, and their debts paid. The primary vehicle of their use, the card itself, isn't even issued by the companies! Instead both companies enter into agreements with various banks to be the issuers of their cards.

With this system the card issuers are the ones that choose what kind of benefits and perks the card comes with. Because of this if your card comes from, for example, Barclays Bank, their perks and benefits for their MasterCards are likely to be very similar to their benefits and perks given with their Visas. While it used to be that banks would only issue one kind of card, as digital payment has become more commonplace, Visa and MasterCard created a more open way of paying debts, allowing both companies to have cards issued at the same financial institution.

To understand how your Visa or MasterCard debt travels and gets paid, you need to follow the credit card receipt. First you pay with your card at a merchant that accepts either of the cards. Then the merchant takes your receipt to their personal bank and deposits the receipts.

From there the receipts are given from the merchant's bank to the card issuer's bank, which takes a fee from the receipt and also sends a fee from the receipt to Visa or MasterCard. Then the card issuer's bank pays the debt and bills the cardholder. This is why if you have a Chase Bank Visa you get a bill from Chase Bank and not from Visa.

Visa and MasterCard also have one other major source of income. Both companies will charge any merchant who uses their card a small fee per transaction. This fee is one of the reasons that only certain cards are often accepted at various retailers. However, because of the sheer size and scope of MasterCard and Visa, it is very rare that one card will be accepted and not the other, or that neither card will be accepted in lieu of a lesser-known card.

How to Choose Visa or MasterCard

This incredible similarity between the two business practices shows that, at their core, MasterCard and Visa function, for all intents and purposes, the same. It is almost as if they are the same company merely functioning under different names. However, you can still find differences between Visas and MasterCards when looking to get a new credit card, but the differences are not in the method of payment.

Instead look to banks to find differences in perks and benefits. It is with banks that the power to create these different contracts reside. Banks tend to distribute cards with extensive packages, so look over them carefully and know that just because Visa and MasterCard are universal companies does not mean that their terms of service are universal. Shop around to find the best deal for you.

The one way you might try to discern a difference between these two choices is their market penetration. Which card is accepted at the most location? Because of the difficulty of knowing this without specific company records, and because of the reluctance to release the exact number lest their competitor proves to have better numbers, this may never be precisely known. However, the point is pretty much moot as both cards are so widely accepted that there is rarely difficulty using them.

The Final Word

In summary, despite the purported differences between Visa and MasterCard, and despite the attempts to sell you one card over the other, there is very little difference for the average consumer. The companies only advertise to try to increase their competitive edge over their rival and banks are only touting the difference of one card over the other in an attempt to get your business, they are not actually reflecting any difference in the card companies.