Luisa Rollenhagen is a journalist and investor who writes about financial planning for Wealthsimple. She is a past winner of the David James Burrell Prize for journalistic achievement and her work has been published in GQ Magazine and BuzzFeed. Luisa earned her M.A. in Journalism at New York University and is now based in Berlin, Germany.
Unless you live in one of those mythical places that only deals in cash transactions—or you’re very interested in keeping your financial activities uh, off the grid—the chances that you use a piece of plastic with the words “Visa” or “Mastercard” printed on it is quite high. In fact, so much of our transactions, especially online, would be completely unthinkable without either a Visa or Mastercard debit or credit card.
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But what exactly are Visa and Mastercard? They’re two names we use so often that they end up meaning simply “credit card.” You know—”put it on the Mastercard.” But they’re not just credit and debit card companies. Visa and Mastercard are two of the largest financial service companies in the world, with Visa reporting a market value of $351.9 billion as of May 2019, and Mastercard reporting $274.9 billion as of August 2019. In addition to providing financial payment options, the companies process financial transactions conducted by both banks and other lenders. They’re like middlemen that move your money from one location (the bank) to another (the merchant that you’re sending money to), and make money by charging merchants and businesses a fee for accepting their card.
Background to Visa and Mastercard
Visa was officially founded in 1976, but the company has actually been around since the 1950s, when Bank of America launched a consumer credit card program called BankAmericard. People evidently liked the convenience of cashless payments, and the program grew, with debit cards being added in the 70s. As the company started growing beyond the borders of the United States, the name was finally officially changed in 1976 to Visa—according to company lore, the name was chosen because it sounds the same in every language.
Since then, the company has grown to include a vast ATM network and innovative fraud protection systems as online payments become increasingly ubiquitous. Visa’s international reputation as a major league player in financial services was cemented when it became the official sponsor for the 1988 Olympics in Seoul, South Korea, which paved the way for the extensive branding that Visa is known for today.
In 2007, Visa incorporated as Visa Inc. and in 2008 the company went public. The fact that this was happening right in the midst of the biggest financial crisis of the 21st century didn’t seem to put too much of a dent in their IPO. Their initial stock went for $44 a share, and then share prices jumped over 20% of their initial price the next day. The company earned the title of having one of the largest IPOs in U.S. history, a fact that’s even more remarkable when you consider that this was happening at a time when financial giants like Bear Stearns were shilling their stock for $2 a share.
The company with the instantly recognizable interlocked yellow and red circles has its origins in the 1940s, when several banks in the United States came together to issue special papers that customers could use like cash at participating stores. These papers became cards, and eventually a group of these participating banks formed the Interbank Card Association (ICA) in 1966.
By the 1970s, that association was already looking beyond the U.S. borders. ICA started partnering with banks in Central and South America, Asia, Europe, Africa, and Australia. Since its original name was starting to sound a bit stuffy for such a rapidly globalizing company, they rebranded to the much snappier “Mastercard.”
Like with Visa, ATM networks and debit cards followed, as did sponsorship deals and a debut on the NYSE in 2006 with shares going for $39. Their latest move has been a revamped logo that embraced a very on-trend minimalism by doing away with letterings and just keeping the two interlocked circles.
Visa vs. Mastercard comparison
There really isn’t much of a discernible difference between the two companies. Whether you end up with either a Visa or Mastercard mostly just depends on what payment network your bank is partnering with. Both companies are also accepted pretty much anywhere card payment is accepted (which isn’t the case with American Express, for example). So instead of worrying whether your credit card has a Visa or Mastercard logo on it, it’s much more important to carefully study the terms and conditions of the bank that’s issuing your credit card. Because things like interest rates, fees, and rewards are all determined by the bank itself, not by Visa or Mastercard.
So although both systems really aren’t very distinct as far as the end consumer is concerned, there are some slight differences in additional services and perks that the companies offer customers. These differences are included in the varying membership structure that both companies have—although keep in mind that Visa and Mastercard don’t determine the terms and conditions for reaching a certain membership level; those are determined by the issuing bank.
|First tier (Visa: Traditional; Mastercard: Standard)||For Traditional members, Visa offers auto rental collision damage coverage, roadside assistance, emergency card replacement, and zero fraud liability.||For Standard members, Mastercard offers ID theft protection, which means that Mastercard monitors websites to see if your personal information is being trafficked. Members also get zero fraud liability.|
|Second tier (Visa: Signature; Mastercard: World)|
|The biggest perk for Signature members is probably the travel and emergency assistance feature, which can help with things like medical referrals, emergency medical transportation, lost-luggage assistance, and legal assistance. There’s also a concierge service which offers free access to help with planning travel, purchasing gifts, finding entertainment or sports tickets or making reservations.||World members get cell-phone insurance, as well as something called “Mastercard Travel & Lifestyle Services,” which offers trip planning and travel benefits. This membership level also offers a concierge service, but there are also partnerships with certain retailers such as Postmates to offer discounts and promotions. All Standard perks remain as well.|
|All Traditional perks remain as well.||You can get “exclusive golf offers and experiences with the PGA TOUR® for World Mastercard cardholders.” There’s also a Golf Concierge Service. (Mastercard loves golf.)|
|Third tier (Visa: Infinite; Mastercard: World Elite)||All Traditional and Signature perks remain, but Infinite members get more extensive travel protection that includes trip delay reimbursements, travel accident insurance, and travel cancellation or interruption insurance. Members also get purchase protection, which insure items from theft or damage for 90 days after purchase. There’s also such a thing as return protection, which will cover you up to a certain amount if merchants refuse to accept returned merchandise.||All Standard and World perks remain, but World Elite members get higher cell-phone insurance coverage, as well as additional discounts from companies such as Lyft and Fandango.|
Probably the biggest difference here is that Visa tends to offer more travel-based rewards and perks, while Mastercard tends to focus more on consumer aspects (and golf). Other than that, the biggest differences in terms of services, perks, and fees will come from the issuing bank. So it’s worth paying more attention to the bank’s terms than what company name is on your card.
While fancy cards are definitely nice, there’s more to a healthy financial foundation than just debit and credit cards. Things like saving and investing are an integral part to creating sustainable financial habits that’ll accompany you throughout your life.
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