What's the Difference Between VISA, Mastercard, Discover, and American Express?

Visa and Mastercard are called payment networks; they process credit card transactions, but they don't issue credit cards. The card itself is issued by a bank like “Chase, or Citi”. This means that each issuer sets the specific terms of the card, such as the interest rate, rewards, payments, etc. These factors are determined by the bank or credit union that issues the card, as well as any affiliate companies, like hotel chains or retail stores. 

Also, keep in mind that you don’t have an account with Visa or Mastercard, you have an account with the bank. Though payment networks have nothing to do with interest rates or fees, they offer some benefits, like payment protection and auto rental insurance.

On the other hand, Discover and Amex issue their credit cards, allowing cardholders to have an account with Discover or an account with American Express. By issuing credit cards as well as processing transactions, Discover and Amex can increase revenue through fees. Below, we will go through the differences between Visa, Mastercard, Discover, and Amex, as well as all you need to know about them.

Credit Card Networks

A credit card network processes and sets the terms of credit card transactions, as well as transfers payments between merchants and credit card issuers. However, a credit card network does not control fees such as annual fees, foreign transaction fees, or interest rates. The four major credit card networks are: 

• Visa
• Mastercard
• Discover
• American Express

Credit Card Issuers

Credit card issuers provide financial backing for credit cards and often take part in developing their rewards and benefits. For example, American Express and Discover are both credit card networks and credit card issuers. Though credit card networks and credit card issuers serve entirely different purposes, a company is allowed to both process and issue credit cards. 

On the other hand, Visa and Mastercard do not issue credit cards to consumers. Instead, financial institutions, like banks, such as Capital One or Chase, or credit unions will issue their cards. The issuing bank’s job includes collecting payments, setting the terms, providing customer service, and more. 

Merchant Acceptance

The number of merchants that allow transactions is one of the most important differences between the four networks. Although the majority of major retailers accept all four, some merchants have contracts with a particular issuer. For example, Costco has a deal with Visa and only accepts Visa cards. 

On top of that, if we compare all four, Amex falls behind the competition with only 6 million domestic merchants in contrast to the 9 million domestic merchants Visa, Discover and Mastercard have. That’s why we can say that Amex is the least accepted one. 

Merchant Cost

Merchant cost is also one of the most important differences between the four networks. Each time a customer uses a credit card to make a purchase, the merchant is charged a small fee by the credit card network to process the credit card transaction. 

The processing fee is different for each network. To give an example, American Express charges 2.5% to 3.5%, while Discover charges 1.56% to 2.3% per transaction. Visa charges 1.43% to 2.4% while Mastercard charges 1.55% and 2.6%. Keep in mind that merchant cost is an important determinant in whether a merchant accepts certain cards. 

Conclusion 

If you want to choose the right card for you, before considering whether to choose Visa, Mastercard, Amex or Discover you should ask yourself these questions: What’s the APR or interest rate? Is there an annual fee? What’s the spending limit? Does the card offer rewards? Later, choose the card that fits your interests the most, but keep in mind that you should select one that is globally accepted.