What’s the Difference Between Visa and MasterCard?

Their signs are so ubiquitous at retail establishments but I haven’t really stopped to think what differences might exist between Visa and MasterCard.

Before answering the question, it is important for students to understand how credit cards work and that VISA and Mastercard don’t actually issue the cards but rather are “payment technology companies.”  From Investopedia:

Credit card companies like Visa and MasterCard don’t actually issue individual credit cards directly; rather, banks, credit unions, and even retailers issue branded cards. The issuing financial institution usually sets the credit card’s terms and conditions, including interest rates, fees, rewards and other features. When a credit card holder pays his or her bill, the financial institution receives the payment—not the credit card company.

Visa, MasterCard, and other credit card companies, such as American Express(AXP) and Discover (DFS), make money by charging merchants and businesses a fee for accepting their card as a method of payment.

So, what are the differences?  According to :

While differences in interest rates, credit limits, rewards programs, and perks are controlled by the issuing financial institutions, Visa and MasterCard compete for those financial institutions. The credit card companies will offer certain perks such as identity theft and fraud protection, travel and car rental insurance, or purchase protection as incentives. Business credit card customers may also be entitled to certain discounts at hotels, airlines, and gas stations. Merchants may also be able to negotiate different fees with the credit card companies depending on volume.

Since the only underlying difference between credit cards is the perks, choosing the right card network comes down to what the customer values most. For example, Visa tends to have a better “Loss of Use” coverage on car rental insurance than MasterCard; however, Visa’s benefits exclude car rental insurance in certain countries entirely. MasterCard offers “Return Protection” with very few cards, whereas Visa’s Signature cards widely carry that service. For gold or other elite card holders, the credit card companies may also offer concierge services to handle certain tasks and save time for the consumer. These services vary and may provide access to event tickets, restaurant reservations, hotel recommendations, or even assist with gift purchases given the recipient’s age, preferences, and the buyer’s spending limit.