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Visa Credit Cards vs MasterCard – Does it Make a Difference?

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If you’ve ever turned on a television or opened a magazine, you’ve probably seen advertisements for MasterCard (Priceless) and Visa (Life Takes Visa). But what do these companies actually do and what’s the difference, anyway?

MasterCard and Visa don’t issue credit cards

First, it’s important to understand that MasterCard and Visa do not issue credit cards.  Instead, they make money by processing transactions between your point of purchase and your bank. They have nothing to do with your rewards programs, interest rates, late fees or customer service issues. Simply put, they are payment networks that connect merchant payment terminals with your bank’s credit card department. Because millions of merchants accept huge amounts of credit card purchases every day, banks prefer to use one of these third party networks to process credit transactions.

So should I get a Visa or MasterCard? And does it matter?

Though networks have nothing to do with fees or rewards, they arrange most non-reward “perks.” Your bank (Chase, Bank of America, etc.) is in charge of things like cash back programs and airline miles. But the networks (Visa, MasterCard, Discover, etc.) add perks like fraud protection, car rental insurance, travel insurance, purchase protection and more. When choosing a network, you need to determine which offers the most generous and relevant perks. Visa and MasterCard are pretty similar, but Visa is just a little better. Its advantage is twofold. First, Visa has better “Loss of Use” coverage on car rental insurance. Second, MasterCard offers “Return Protection” on very few cards, whereas Visa Signature offers the service broadly. With exclusivity arrangements falling by the wayside, you are now more likely to be given a choice between networks when approved for a credit card. If your choice is between Visa and MasterCard (and it often will be), we recommend Visa, especially if the card falls under the Visa Signature category.

Visa highlights:

Capital One Venture Rewards Credit Card
Apply Now

on Capital One's
secure website

Visa Signature cards offer some pretty awesome perks on top of your bank’s rewards program. Take the Capital One® Venture® Rewards Credit Card card for example. Deemed Money magazine’s “Best Rewards Card if you aim to rack up airline miles,” it has an impressive flat 2% rewards rate on all purchases. You receive a sign-up bonus: Enjoy a one-time bonus of 40,000 miles once you spend $3,000 on purchases within the first 3 months, equal to $400 in travel You never have to worry about blackout dates, and there are no limits or expiration dates on miles. The Venture’s Visa Signature status piles on even more benefits. You are granted 24-hour complimentary concierge service, lost luggage reimbursement, purchase security, travel and emergency assistance services, roadside dispatch and more.

Chase Freedom - $100 Cash Back Credit Card
Apply Now

on Chase's
secure website

Another Visa favorite is the Chase Freedom. Though not actually a Visa Signature, it’s much more accessible than the Capital One Venture: it has no annual fee, but has a really great signup bonus of $200 cash back (2x the Venture) and gives a whopping 5% back on categories that change every three months. These can include gas, groceries, hotels and dining out. Plus, you earn 1% back on everything else and get access to the Chase Ultimate Rewards Mall, which earns significant bonuses on online shopping at stores ranging from Express to Ralph Lauren to Starbucks.com.

MasterCard highlights:

Barclays Arrival Credit Card
Apply Now

on Barclays's
secure website

The Barclaycard Arrival Plus™ World Elite MasterCard® is like the Capital One Venture, but possibly better. It offers 2.2% rewards on every dollar spent when you redeem your rewards for travel – 2 miles earned per $1, and 10% of those miles credited back to your account when you redeem as a statement credit against any travel expense. There’s no foreign transaction fee, and the $89 annual fee, waived the first year, is offset by a strong bonus: Earn 40,000 bonus miles when you spend $3,000 or more on purchases in the first 90 days from account opening. Finally, it’s a World MasterCard, which comes with cool perks like trip cancellation insurance, extended warranty and travel concierge services.

Citi Simplicity is pretty much the best low APR/balance transfer offer out there: 18 months interest-free, with a low 3% balance transfer fee. It also has no annual fee, but what sets it apart is that it has neither a late fee nor a penalty APR, so you won’t see your interest rate jacked up to 30% if you miss a payment. It’s ideal for anyone who needs to make a big purchase and pay it off over time, or for anyone who’s already got some credit card debt.

Other Networks

Of course, Visa and MasterCard aren’t the only networks out there. Discover and American Express are the main competitors. Generally, Discover offers the worst perks (no purchase/return protection, no loss of use coverage on rental cars, and no concierge services). American Express has the best perks but is not, unfortunately, as widely offered or accepted as Visa or MasterCard. American Express has better insurance coverage on both return and purchase protection and offers the same protection on all cards—not just premium offerings. For a good American Express rewards credit card, check out the Starwood American Express. It offers big earnings on hotel stays and some great signing bonuses. But if you’re like most people, you’ll stick with the big guys—Visa and MasterCard—simply because they are so universally accepted.

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  • Singampuli

    Good info, thanks.

  • Lei

    Very informative

    • http://www.nerdwallet.com/ NerdWallet

      Thanks, Lei!

  • Good Hope

    Very well explained. Thanks…..

  • corihor

    I have a discover and amex and my discover offers the same perks and is cheaper to use a few of them. The customer service with the Discover is also superior to American Express

    • Dark_Illusion

      nah…………….

      • rehanny

        Wow

  • Jimr1818

    Discover is virtually useless if you travel anywhere outside of the United States..

    • mhunter86

      Not true… you obviously haven’t travelled lately.

  • mhunter86

    Your information on Discover is wrong. Discover does include purchase protection. IMO the new IT card is a really compelling offering… and it has no foreign transaction fees. Yes the number of countries where it is accepted is limited, but it is growing everyday thanks to the purchase of the Diner’s network. I’ve been using Discover all over Brazil with absolutely no problems. One other point, if you’re looking for the best card to rent a car with, that is Diner’s Club… hands down. Diner’s Club insurance is primary… whereas Visa or Mastercard it is secondary… in other words, you file a claim with your own insurance first. You should really revise your article. It is wrong.

  • SuperKirby

    Visa Signature states up to max $500 purchase protection

    http://usa.visa.com/personal/visa-signature/benefits/purchase-security.jsp

    World MC states up to $3000 max

    http://worldcard.mastercard.com/content/world/mea/en/peace-of-mind/purchase-protection.html

    If I have a Chase sapphire Preferred World MC, does this mean i’m covered up to $3000 purchase protection? Most websites/blogs say the CSP PP is only up to $500/claim, I guess most people have the Visa Siggy version? thanks!

    • http://www.nerdwallet.com/ NerdWallet

      I think you’re right – the commenters must have the Visa Signature version.

  • Man

    i believe that being a member at SA5M is just “a dream come true”.

  • Kevin

    When I was in Switzerland, Austria, and Germany both Visa and Mastercard were accepted pretty everywhere. I have both of them but I used my Visa only because it was the card that had no foreign transaction fee.

  • West Brom

    I dont know how i got here but Visa RULES!