At this point in American history, exposure to the marketing slogans of credit card giants MasterCard and Visa is basically co-extensive with being exposed to any kind of commercial media. But, with all this information surrounding us, it is still an open question to many Americans exactly what different products and services are being offered under the umbrella designations of these major brands.
Generally, receiving a credit card offer from you bank means ending up with either a Visa or MasterCard, while Discover and American Express constitute growing, though still less frequently available, options. This is due to the fact that agreements that tie a bank to one credit company are going out of fashion.
This, in turn, can be traced to the 2004 decision made by the Department of Justice to prohibit the guidelines forming Visa and Mastercard’s Competitive Programs Policy or CPP, which required that banks only provide their customers with cards from one network. In other words, banks providing Discover or American Express cards couldn’t issue Visa or MasterCard cards and, because of the relative commercial dominance of the latter, Discover and AmEx were effectively blocked from providing cards through banking institutions.
Since the policies guiding this practice have been eliminated, there are new choices available to consumers, and new questions as well. It’s fairly well known that MasterCard and Visa have a greater number of merchants accepting their cards than Discover or AmEx. Less clear is what the differences are between the products offered by Visa and MasterCard. Are there differences worth knowing about?
The quick answer is, there are indeed. But, to gain perspective on these differences, some quick background information to start.
You Can’t Get a Visa or MasterCard from Visa or MasterCard
To begin with, neither MasterCard nor Visa will give you a credit card. Rather, they profit from handling the exchange between your banking institution and the places where you swipe your card. As a result your bank, rather than these companies, is the organization actually managing the rewards, helping clients, setting rates of interest, and assessing fees on late payments.
MasterCard and Visa then provide the mechanisms connecting the credit card machines in just about every American locale to the credit card department of your card issuer. This is preferable for many banks because the cards they issue will be so widely accepted. AmEx and Discover’s model, where the companies issue their own cards, have also been very successful, though clearly not as omnipresent as Visa and MasterCard.
Is a Visa or MasterCard the best for me?
All this is not to say that there’s no difference between what Visa and MasterCard have to offer. In fact, various fringe benefits serve to differentiate the cards since they’re provided by the credit card company rather than a bank.
Due to rules like Regulation EFTA, all credit card companies need to back their cards up against identity theft and other malfeasance. But, non-mandatory extras, such as providing insurance for a rented automobile, can prove to be areas of real difference. Plus, different card plans offer different extras. Visa, for example, offers cards like Visa Signature and Visa Classic while MasterCard can provide the MasterCard World and World Elite.
Most of the areas of contrast are in the realm of return protection and purchase protection, as well as insuring a rented car, insuring against surprise travel expenses, and concierge options.
For the most part, Discover is at the bottom of the barrel when it comes to these extras, with no concierge, rental insurance, or coverage for purchases and returns made using the card. AmEx has the most extras, especially on premium cards like the AmEx Platinum, and MasterCard and Visa are about in the middle. Visa has a somewhat nicer offering, since Visa’s protection for car rental insurance is superior and more Visa cards have return coverage for items purchased with the card.
AmEx, however, has both of the market leaders beat on both insurance offered and coverage for returned items, both in terms of the amount of insurance cardholders receive and the proportion of their products covered by such protection. AmEx has also introduced premium return protection, which further extends available coverage for returns even to the point of applying to non American Express-issued cards.
Tim Chen is founder and CEO of NerdWallet.com, a site dedicated to helping consumers understand the ins and outs of credit card offers.