I ask why would I care because banks invest heavily in making sure customers know on which circuit their cards operate on. However, most places accept both MasterCard and Visa (and potentially others, depending on the country).
In: Economics
Not an expert here but I’ll share what I know since noone else has answered. A lot of these companies have their own credit cards that offer different benefits, like cash back, so that’s one way they might appeal to common people more than others. As for things like debit cards and such where they aren’t offering interest rates or cash back, I think it’s more about appealing to companies than people. Getting banks to sign on to use them or stores to only accept their cards.
Generally they compete on 5 things.
1. Cash Equivalence / Top of Wallet: Ability to use it anywhere / anytime. If it’s basically the same as ‘Cash’ without having to visit the ATM, all the better. This is why their slogans & branding reinforce their ubiquity so strongly. It’s also why they fight so hard to be in every store. It’s not replacing cash if you can only use it at that one store down the street.
Visa: “***Life*** takes Visa.” / “***It’s everywhere*** you want to be.”
Mastercard: “There are some things that money can’t buy. for ***everything else****,* there’s mastercard.”
AMEX: “***Don’t live life without it.***”
2) Credit Available (& fraud detection): To consumers, the ability to (temporarily) spend beyond immediate liquid means. For competitive advantage, their ability to extend credit (with acceptable fraud losses) to the broadest possible audience means more users. Note that losses are carried mostly by the re-selling services, but supported by their broader network monitoring services.
3) Rewards: Cash Back, Extended Warranties, Price Protection, Fraud Guarantees, Concierge etc. Why spend cash, when you can spend cash and get perks?
4) Prestige: Color (Black), Material (Plastic vs Metal), Image (Custom images, holographics etc)
5) Interchange fees: These are actually quite similar competitively speaking. I believe Visa and Mastercard are quite similar. AMEX charges more. But premium cards do carry higher fees to support their rewards – in theory stores also benefit by attracting bigger spenders who gravitate to those cards for the 4 reasons above.
Visa and MasterCard are “platforms.” That is, they are the middlemen that connect buyers to sellers. Platforms generally compete with one another by trying to make the biggest network possible. For example, think about the Uber platform: the more drivers it has leads to more passengers which leads to more drivers and on and on. The same thing is happening with credit cards: the credit card providers make the most money when they can shift as many purchases as possible happen on their credit card (the get a very small percentage of each sale, but they add up fast) instead of with cash/competitors. So the credit card companies have to balance out the incentives on the two sides of the market (shoppers and sellers) to grow the network as big as possible.
As for you, the consumer, this is a great thing. For the most part, sellers are willing to pay for access to customers. If accepting credit cards means that they will make more sales (think about, say, an Etsy store), then they’re willing to pay a small amount of their revenues to credit card companies to seamlessly facilitate the transaction.
Because the sellers are willing to pay to have access to credit card networks, that creates lots of money to operate the credit card platform. Some of that money is used to pay the companies that process the transactions (the companies that own the machines that swipe cards are typically not owned by the credit card companies themselves). Some of that money is profits.
And lots of that money is used to incentivize customers to sign up and use their credit cards. Rewards points, insurance programs, lounge access, personalized card designs, etc. are all indirectly funded by the other side of the market. The network is growing by transferring some money from sellers to cardholders.
The credit cards companies are crafty, though. The have ensured that stores are not allowed to charge you a fee for using your credit card as compared paying with another form of payment (like cash). That is, they can’t make a specific card user pay the fees associated with that card. This means that stores increases ALL of their prices on average to cover the costs of people generally using credit cards, regardless of whether or not you, specifically, are using a credit card for your order.
Assuming you aren’t dropping millions of dollars on your credit card at your local convenience store, this means that your individual choice to use a credit card will never have any impact on any price you see (you’re just a drop of water in the ocean), but you can reap lots of rewards from signing up for the right the card and paying it off in full every month.
TDLR: credit cards are platforms which connect sellers to buyers and make their money by maximizing transactions. Since sellers want more buyers, they’re willing to pay to get them, and credit card companies transfer some of that willingness to pay to customers in the form of credit card incentives. Their competing means you, the consumer, get card perks.
Visa and MasterCard’s customers are the retail businesses, not the consumers. So you as a consumer don’t need to care at all.
The only exception is when traveling overseas there may be places that accept only a few processors, so you need to make sure you have a card with one of those processors.
As a consumer, you should actually care. I own a restaurant and I take all credit cards. Each separate credit card processor charges different rates. Every year, we have to find the best processing rates. Every year, my prices increase because my fees increase. My fees get passed along to my customers.
Now, imagine if every person who had a Visa and/or Mastercard, called and complained about this processing fees. Imagine if customers demanded that 2.5% never leave their accounts! You are paying these fees because I include them in my prices. If the fees didn’t exist, my prices would be about 3% cheaper immediately.
You as a consumer probably doesn’t care…the retailer has to use a payment gateway to process the cards…some are more than others, so the retailers care. Visa, Discover and MasterCard costs them basically the same – amex, pay pal, and ach are different…
Find a card you like and go with it, don’t worry about the ‘follow the money’ half of the transaction.
This is actually a fairly interesting topic.
Visa and Mastercard to compete for your use of their cards. When signing up for a new credit card, you may not look at whether its a visa or mastercard that you are getting since they are often so widespread, but they do impact what you do look at: card rewards.
Credit card rewards generally get the money needed to find them by the use of the credit card interchange fee. This is a hidden fee levied on a per transaction basis onto the store you are buying from, is often 1% to 3% depending on class of card. This does not go to mastercard or visa, another smaller fee does. This fee goes to the bank who assigned you this card.
This produces a balance that needs to be struck here. Banks want more customers, so they compete with eachother by giving greater rewards, funded by the interchange fee. Raise the interchange fee too high, companies will stop accepting your card or deincentives its use because it eats into their profits. But if you don’t raise the interchange fee for banks, banks will go to the other payment processor and ask them to raise the interchange fee. This means your competitor gets more cards and as a result more income instead of you.
This has become a bit of a problem lately since interchange fees have constantly been going up as a result. Kroger for instance stopped accepting Visa for a brief period last year due to high fees. This has largely resulted in a bit of a hidden corporate war currently playing out to figure out how to handle payment processing with all of this in mind.
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