What is the difference between a Mastercard and Visa credit card?

Most credit cards feature either a Mastercard or Visa symbol. But what do they symbolise? And what is the difference between Mastercard and Visa? Read our guide to find out.

Visa and Mastercard are payment companies. When you use a credit card, they handle the transaction, making sure the retailer is paid and your credit card is charged accordingly. 

They are integral to the credit card process. But, should you factor whether it is a Mastercard or Visa into your decision? In this guide we explain the difference between the two and how you can choose between them.

What are Visa and Mastercard cards?

Visa and Mastercard are the payment companies that handle transactions made on credit, debit and prepaid cards. Essentially, they are the middlemen between you and your card provider.

If you take a look at a credit card, it will have a symbol on it to tell you who the payment provider is. This is usually either Mastercard or Visa.

Neither Mastercard nor Visa issue their own credit cards; the symbol is simply telling you which of them process payments for the bank, or financial firm who has issued your credit card.

Let’s say you have an HSBC Mastercard. That means you have a credit agreement with HSBC, and they are your credit card provider. But when you use your credit card, it is Mastercard that handles the process.

That means when you try to buy a pair of jeans with your card, Mastercard checks with the card provider – in this example HSBC – to see whether the transaction should be approved or declined. Have you enough credit on your account to cover the cost of the jeans? If HSBC says yes, then Mastercard confirms with the retailer that you can buy the jeans and processes the payment.

The history of Mastercard and Visa

Modern credit cards began with the Diners Club card in the 1950s in America. Finders Services brought the cards – known as charge cards at the time – to the UK in 1961. Mastercard dates back to 1966 when the company launched the MasterCharge card.  It became known as Mastercard in 1979.

Visa began as the BankAmericard in 1958. The company expanded internationally in 1974 and adopted the Visa name in 1976.

Since the 1970s, both Mastercard and Visa have been central in the development of credit cards. 

What benefits do Visa and Mastercard offer?

Both Visa and Mastercard offer a range of benefits to people who use their services. These include:

  • Contactless payments: Both Visa and Mastercard cards have contactless technology that means you can pay by tapping your card against a compatible card reader without needing to enter your pin.

  • Exclusive offers: Mastercard offers a range of exclusive deals to customers including ‘Priceless Cities’ which gives you deals on dining, travel and shopping. Similarly, Visa Checkout gives Visa cardholders access to exclusive discounts and offers.

  • Safe online shopping: Both Mastercard and Visa offer extra security systems when you shop online to make sure your transaction is safe. These are Visa Secure and Mastercard SecureCode.

  • Simplified online shopping: Visa Checkout and Mastercard’s Masterpass are both digital wallets that allow you to shop with participating retailers using stored shipping and payment details.

  • Worldwide security: If your card is lost or stolen while you are abroad, or you have a problem with your account, both Visa and Mastercard have global phone lines available to help you 24/7.

  • Zero liability: Both Visa and Mastercard have Zero Liability policies, which means you won’t be held responsible for unauthorised payments made with your card or card details.

Mastercard and Visa don’t decide the individual details of your credit card such as, what interest rate you’ll be charged. That is down to your credit card provider. Your credit card will decide the interest rate (APR), any interest-free promotional rates on the card, the fees you’ll be charged and any rewards you can earn.

Do Visa and Mastercard offer protection online?

If you use a Mastercard or Visa credit card for your online shopping you are protected. Both of them protect your purchases from fraud.

Mastercard has a SecureCode scheme and Visa has Visa Secure. These systems take extra steps to make sure that only the authorised cardholder can use the credit card to pay for items online. 

They confirm your identity when you shop and, if they are unsure, will ask you for extra information before you pay to make sure it is you.

What’s the difference between Mastercard and Visa?

There isn’t a great deal of difference between Mastercard and Visa. Both are accepted around the world at most retailers. While there is a chance you could find a shop that accepts one but not the other, it would be incredibly rare, so shouldn’t be a factor when choosing a credit card.

As you have seen above both Visa and Mastercard offer all the same benefits you would expect from your credit card. Any extra offers are made by the credit card provider and whether it is a Visa or Mastercard usually won’t affect these.

Mastercard vs Visa Exchange Rates

There is one difference between Mastercard and Visa that could affect your decision if you are looking for a credit card to take on holiday. When you use a credit card abroad, your money is converted from the local currency into pounds sterling (GBP) using the payment provider’s exchange rate. 

If you have a Visa card, you’ll pay the Visa exchange rate and Mastercard holders will pay Mastercard’s exchange rate.

In general, Mastercard tends to offer a marginally better exchange rate than Visa. That means your holiday spending will be slightly cheaper with a Mastercard credit card than a Visa credit card.

Visa vs Mastercard Sponsorship Deals

Another difference between Visa and Mastercard is their sponsorship deals. Both firms sponsor a range of events and activities around the world. If you hold their card you may get special privileges when it comes to events with their sponsors. 

Mastercard sponsors:

  • UEFA Champions League

  • The Olivier Awards

  • The Brit Awards

  • Goodwood Road & Racing

  • Disneyland Paris

  • The Open Championship

  • The AIG Women’s British Open

Visa sponsors:

  • UEFA Women’s Football

  • FIFA

  • Olympic Games

As part of these sponsorship deals Visa and Mastercard may offer exclusive competitions or access to people who hold their cards.

For example, Mastercard sponsors Disneyland Paris and offers cardholders can get premium seats at shows in the theme park and VIP tours. Meanwhile, Visa’s sponsorship of FIFA means cardholders can get exclusive early access to ticket sales.

How do Visa and Mastercard make money?

Visa and Mastercard make their money from the banks that issue their credit, debit and prepaid cards and the shops that accept these cards as payment.

Their main sources of income are:

  • Bank settlement fees: This is what card issuers, such as HSBC or Barclaycard, pay every time one of their customers pays for something using a Mastercard or Visa card.

  • Card issuer fees: Visa and Mastercard charge financial firms service fees that let them use Mastercard or Visa payment systems for their credit cards.

  • Overseas fees: If you use your credit card abroad then Mastercard and Visa charge your credit card provider an extra fee for processing foreign transactions. Many credit card firms pass this fee onto customers.

Should I choose Visa or Mastercard?

There isn’t a lot of difference between Mastercard or Visa. Generally, you should choose a credit card based on the credit card provider not the payment processor. 

When you are choosing a credit card you should consider:

  • The interest rate you will be charged: This will decide how much it costs you to use your credit card, so should be an important deciding factor when choosing a credit card. You can find out more with our guide to credit card charges.

  • Any promotional offers that  the credit card has: This could be an interest-free period on purchases that means you can spread the cost when buying an expensive item. Or it could be an interest-free deal on balance transfers meaning you can move an existing credit card debt and stop paying interest for several months.

  • Reward schemes. This is where you are rewarded with cashback or loyalty points when you use a credit card.

  • Your chances of being accepted for that card: If your credit card application is rejected it could damage your credit score and make you even less likely to be approved for another credit card. So it is important you only apply for credit cards that are likely to accept you. You can find out more in our guide to applying for credit cards.

One time when you may want to factor in whether your credit card uses Mastercard or Visa is if you are going to use the card abroad. In that case you may want to look for a Mastercard as the exchange rate tends to be slightly better.

Overall, If you really want to make a decision between the Mastercard and Visa, consider whether you’ll be using your credit card abroad, planning a trip to Disneyland Paris, or hoping to go to the Olympics. These exclusive perks might make it worth choosing one over the other.  

29th May 2020