Visa vs Mastercard: what's the Difference?

When it comes to signing up for a credit card, one of the choices you may have to make is whether to go with one of the two biggest names in credit card payment networks – Mastercard or Visa. But is there any difference between the two? What should you be looking for if choosing between them? We take a look.

There are hundreds of different types of credit card packages available through financial institutions, each with their own unique set of benefits and costs.

Most credit cards look the same – a rectangular piece of plastic with numbers on it – and more often than not, these cards will be stamped with the brand logo of either Visa or Mastercard.

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The main differences between Visa and Mastercard

These two companies, Visa and Mastercard, appear on the lion’s share of credit cards in Australia, according to Statista.com. But these companies have only a small amount of influence over the actual credit card products and benefits that a user may end up signing up for. This is because:

• they only provide the system that allows a payment transaction to take place, rather than distributing cards themselves
• they do not determine how much interest you could be charged on outstanding balances, nor what types of points you will earn if your card is attached to a rewards program.
• credit cards from both platforms are accepted just about anywhere in the world.

But there are some minor differences between the two payment platforms:

• Some banks and outlets have “exclusive” arrangements with one payment platform over the other. For example, in 2015 National Australia Bank signed a 10-year agreement with Visa which means until 2025, the bank’s customers will only be offered Visa credit cards.
• “Benefit” programs – perks built into the cards by Visa or Mastercard before the issuing bank applies its conditions – differ slightly. Take a look below at “What are premium credit cards” for more information. But banks may change these conditions and/or offer their own benefit programs, so it could be a good idea to check out the benefit package conditions on each individual credit card a bank is offering, before making a decision.

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Visa or Mastercard: if they are much the same, how do you choose the right credit card?

The Australian credit card market is a somewhat complex one, with hundreds of different types of packages on offer from financial institutions. Each has its own set of benefits and conditions. So, when it comes to choosing the right credit card for your needs, you could start by asking yourself the following questions:

• What you will use it for: is it for a one-off purchase? Or will you be buying items regularly on it? Different cards suit different uses.
• Your capacity to repay any debt that accumulates: paying for items in “credit” on the card actually means you are borrowing money from a financial institution – going into debt. It could be worth comparing other types of borrowing against the long-term costs of having a credit card.
• If you would use the credit card’s extra benefits: take a look at the card package’s rewards programs and any other benefits it may offer, such as insurance for items purchased.
• What credit cards, packages and deals your bank of choice is offering and how those packages compare to the rest of the market.

It’s also a good idea to research the different types of cards that are available, and what features they offer.

What types of Mastercard and Visa credit cards are available from lenders?

While there are a huge range of cards available carrying the Visa or Mastercard logo, most of them can be classified as falling into one of these broad consumer categories, which Canstar compares either on our website and/or in our Star Ratings and Award research:

• Premium is for consumers wanting a card that offers more benefits and frills than a more basic credit card would.
• Rewards is for those who want to earn a return on their everyday spending, in the form of cash-back, gift cards or lifestyle rewards
• Frequent flyer is for those who want to be able to redeem card points for flights.
• Low rate is for those who want a low rate and flexible repayment conditions.
• Low fee is for those after a low, ongoing fee and potential access to some premium features.
• Balance transfer is for those who want to transfer an outstanding balance from one card to another.

Here is a brief explanation of what each of these card types are, and a selection of some of the credit cards available on Canstar’s database, to give you an idea of what’s on offer from various financial institutions.

What are premium credit cards?

Ever wondered what a “Platinum” or “Signature” credit card is? These labels and other names (like “silver”, “gold” or “black”) tend to indicate that the card is part of a package put together by the bank (sometimes in conjunction with Visa or Mastercard) offering more perks than a standard credit card. These types of cards are typically known as ‘premium’ cards.

While premium cards offer more benefits than a standard card, they also typically cost the user more in the form of higher fees and/or higher interest rates charged on outstanding balances. In many cases, these cards are only available to higher-income, higher-spending customers, too.

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What are rewards credit cards?

These types of credit cards have a rewards program attached, designed to give the user bonuses, either instantly or accumulatively, each time they use their card.

These bonuses could include the ability to earn ‘points’ which can be used instead of cash to pay for flights or goods and services, while some allow the points to be converted to cash which is then taken off the balance that remains owing on the card.

But most rewards cards have annual fees, spending limits and other restrictions or conditions which can make them more costly to use than other types of cards.

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What are frequent flyer credit cards?

These types of cards are attached to a specific rewards program – an airline’s frequent flyer program that earns the user points to spend on flights and sometimes other goods and services, too, depending on the scheme.

Australian programs include the Qantas Frequent Flyer and Virgin Velocity schemes.

What are low rate credit cards?

Low rate credit cards typically come with lower purchase rates than other types of cards. That means if you do not pay off the entire balance when the credit card payment is due, the interest charged on your outstanding balance could be lower than what it would be on other, higher-rate credit cards.

But low rate credit cards are generally ‘no frills’ and tend to not include the rewards programs, perks and bonuses that premium or rewards cards may offer. It could also be possible that card fees could be higher than some other types of cards (such as “low fee” cards).

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What are low fee and no fee credit cards?

Typically, credit cards have ongoing annual fees, which the bank charges to cover the cost of providing the card and any associated benefits, such as rewards programs.

Low fee credit cards typically have lower ongoing fees than other types of cards, but there is often a trade-off that occurs for that to happen. Some card packages may have low fees but offer few extra benefits, while others may have some benefits but charge higher interest rates on overdue balances to pay for them.

There are also no fee credit cards, which do not charge users an annual fee.

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What is a balance transfer card?

Some credit cards allow users to add debt from another credit card or cards. Typically, a ‘balance transfer’ card has a lower interest rate than the original card – as low as 0% in some cases – which could potentially help the user to pay off the debt more quickly, or cut down on monthly repayments.

But there are some potential catches to this type of transaction:

• There could be an up-front fee to transfer debt from another card.
• The lower interest rate could be a “promotional rate” which expires after a certain time and then reverts to a higher interest rate.
• There could be ongoing higher fees associated with these cards than other types of credit cards.

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