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MasterCard vs. Visa
 Feb 06, 2009

MasterCard and Visa are the most recognized credit cards worldwide. In this article we will review the history of MasterCard and Visa. We will also compare the pros and cons of MasterCard versus Visa, and discuss investing in MasterCard vs. Visa.

When it comes to MasterCard and Visa, one is hard pressed to find any solid differences. The two credit transaction processing companies often serve the same clientele (look in your wallet, you probably have at least one of each), and are widely accepted in many of the same places. There are some exceptions the Olympics only accepts Visa around the world, but for the most part when it comes to using MasterCard or Visa, you are likely to have a very similar experience.

Interest rates, fees, and other items are likely to be similar, and both companies are so well known that they are accepted in many places at home and abroad. In fact, they are so similar in terms of ability to use, that it really does not make that big a difference. Instead, you are more likely to find differences between the offerings from specific banks.

The nature of MasterCard and Visa: Technology companies

MasterCard and Visa are payment processing companies. They use technology to facilitate the movement of money and payment via credit. Indeed, neither of them is very much exposed to risk from consumers. Unlike Discover and American Express, MasterCard and Visa rarely actually lend money to consumers. Instead, banks affiliated with their transaction processing actually issue the credit cards and take on the risks of default.

Instead of looking at which company offers the better credit card, it might be more beneficial to consider which company provides the better investment opportunity.

MasterCard v. Visa: Investing

As our economy completes the transition to one that is credit based (instead of cash based), we will see growth for MasterCard and Visa. And, even though things are looking iffy right now, the companies' limited exposure to risk associated with consumer lending makes them somewhat attractive. After all, things are like to move in a direction that favors credit as a major part of the economy. So which of these companies offers the best investing opportunity? Well, that depends.

Visa is new to the public trading thing, with a recent IPO. This means that the stock price is higher than MasterCard. But that is not always an indicator of true value. Visa has a higher expected growth rate. However, the P/E ratio is not as favorable.

MasterCard seems to have better value overall from a sensible investing standpoint. Revenue growth is projected to be higher (25% for MasterCard as opposed to 18.1% for Visa). This means that the potential for new capital is there for MasterCard. This company tends to edge Visa out for now, since it might be slightly overvalued due to its relatively new public nature.

Investing in financial companies

Even though the current crisis has many worried about financial companies, there are some that are likely to recover and show solid growth and value. Both MasterCard and Visa fall into this category. And while MasterCard may seem to edge Visa out for now, neither appears to be a really bad choice.

Disclaimer: I am not an investment professional. This should not be construed as investment advice. All investment carries the risk of loss. Before investing, do your own research and/or consult with an investment professional.

Related Article: American Express vs. MasterCard >>

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