Why take Visa and not MasterCard?

I had an odd experience with an on-line retailer the other day. I went through the ordering procedure; at the end their only possible method of payment was “Visa”. I assumed that they really meant “Visa or Mastercard”, and entered my MC number. Well, whoops, I subsequently got a polite email explaining that this place only took Visa, not Mastercard.

So, my question is: why accept one and not the other? Before this, I wasn’t aware that there were places that accept only one of the two cards. An earlier thead on differences between Visa and Mastercard mentions that AT&T will accept Mastercard, but won’t accept Visa. However, I still don’t know what the reason is for accepting one over the other.

And…just how many places will take VIsa but not Mastercard? Should I switch my Mastercard account to a Visa account?

I’ve always assumed that in exchange for signing an exclusive contract with one card or the other, the business has gotten a discount on its rate with that provider.

In other words, say you charge something at Big Store using your Mastercard. When Mastercard processes that purchase, they charge Big Store some fee (a percentage, or perhaps a flat rate). If Big Store agrees with Mastercard to only accept Mastercard and not Visa, that’s to Mastercard’s advantage, because it will force people who have both cards to use one rather than the other. As an incentive toward this end, Mastercard charges Big Store a discounted fee.

That may be true, but as far as I know Visa and MasterCard are the same damn thing. (You know, a virtual monopoly on credit cards). I always assumed they were once seperate entities that had long been merged, and kept both brands as some people had loyalty (to a credit card!?) to one brand or the other.

This is like the Coke/Pepsi thing. The same reason KneadToKnow said. They have an exclusive & then they get free products or a better rate.

Don’t you remember the Olympics? “We don’t take AE”

American Express is different, though, because it’s only recently that it started providing credit cards at all. In the past, it only had charge cards…you could run up a balance that had to be paid by the end of the month.

Something smells fishy with these answers. If these “exclusivity” deals are so good, why is it very ridiculously rare to find a business that takes one without the other? (V and MC, i mean.)

There must be another reason. For example, when they say “We don’t take AmEx”, it is not neccesarily because of any exclusive deal. It might just be that they prefer the 98% that MC/Visa pays, as opposed to the 95% that AmEx pays - or whatever the rates are nowadays.

Yes, my thought also. If’n you walk into most any place of business, there’s a sticker on the door advertising that they accept both Visa and Mastercard. Not two stickers, just one.

Plus, just who would benefit under an exclusivity deal? My credit-card bank, and, I assume, most others, offer both Visa and Mastercard. I wouldn’t think they care which I get.

I think stores would be quite a bit different than the Olympics.
Stores have to pay fees to have the ability to accept Visa & Mastercard. Now, if it’s a smaller store, they might only be able to accept one. A lot of businesses have now started using all-purpose machines, set-up through banks. At the place I work, we accept Visa, Mastercard, and debit cards and we run them all through the same machine. Now, back when we were a smaller business we used the carbon paper receipt machine and the cards were separate (we only accepted Visa & Mastercard, though). In that case, we had to pay for accepting them separately and a smaller business could maybe only afford to accept one.
OTOH, I think the Olympics thing is a little different. I think Visa sponsored the Olympics as well, and as part of that the Olympics only accepted Visa.

To make this even more confusing, my parents have a card which is BOTH Visa and MC.

I never got that.

Because Visa and Mastercard don’t have exclusivity with each other. The Justice Department is investigating them over this. American Express complained to them that Visa and MC are attempting to put up barriers to entering the market because:

  1. They have exclusivity deals with banks
  2. The deals don’t apply to each other.

Even though they are almost identical. Visa and mastercard are very different entities. Ithink that most people will take both is that if you jump through the hoops to accept one you probaly qualify to take the other as well so why not do it. As for the monoploly question I don’t know. I do know that Visa is a non-profit organization and that may have something to do with it.

for what its worth.

An aside:
What is the difference between a charge card and a credit card? I should know this, but, sadly, I do not.

With a credit card, you have the option of paying off a portion of what you owe at the end of the month, retaining your balance, which gains interest, as long as your balance at any given time is less than your credit limit.

With a charge card, you must pay off everything at the end of each month (there’s no credit involved.)

Credit card companies pay more to the merchant because they also make a lot of money on interest. Since charge card companies (like Amex) don’t make money on interest, they have to pay the merchants less.

Hey question. I know this isn’t really on the same subject, but tell me this. This sounds stupid. Can someone explain to me what APR really means? I have an APR of 14.9% with a $2000 balance and I get charged $40 for finance charges.

raverxhouston, somebody will correct me if I mess any of this up, but I’ll give it a shot. :slight_smile:

The Annual Percentage Rate (APR) on any kind of loan is the percentage of your balance that you’d owe in finance charges if you maintained that balance for a year, in the absence of compounding. I’ll go into more detail on that in a minute.

My credit card (and, I suspect, most others) actually calculate finance charges on a daily basis. Say the APR is 14.9%, then the Daily Periodic Rate (DPR) is 14.9%/365 = 0.04082%. Each day, interest (aka finance charges) accrues at (0.0004082)*(That day’s balance).

These charges are recorded daily over the course of the (monthly) billing period, and after 31 (or 30, or whatever) days, the finance charge is then added to your balance. It’s important to note that, while they are calculated based on each day’s balance, finance charges are added to your balance only once per month - at least for monthly compounding, which I believe is the norm.

Now, the fun thing (for them) is that these finance charges are part of your balance for the next billing period, and earn finance charges themselves. This is what’s known as compounding - interest on the interest (on the interest on the interest on the…)

If, somehow, you were not required to make payments on a constant balance of, say, $1000 for an entire year at a (monthly compounded) APR of 14.9%, you would owe more than $149 in finance charges at the end of the year. Since finance charges are compounded monthly, it would actually work out to something like…

:: punches madly into calculator ::

$159. Or something close to it.

Now, most cards require to you make at least some minimum payment each month, which further complicates things. I’ve never bothered to investigate just how they arrive at the minimum payment amount printed on the statement, but among other things I think it’s supposed to ensure that you at least keep up with the finance charges. Not certain about that.

Now, looking at your numbers, I’m having trouble reconciling them. The DPR for your APR is 0.04082%. If you maintained a balance of $2000 for the entire (31-day) month, I’d expect to see a finance charge of $25.31, not $40.

Couple of possibilities that I can think of:[ul][li]Was the Average Daily Balance for the month actually $2000, or was is perhaps higher? Did you pay off a large chunk of the previously higher balance halfway through the month?[/li][li]Is there possibly a Minimum Finance Charge? $40 sounds really high if that’s it, though - on my card it’s $0.50.[/li][li]Did you take out any cash advances? They’re often at a higher rate (although on my card it’s only a couple of percent higher).[/li][/ul]
Hmm…I don’t really know how they got $40. If it’s not any of the above possibilities, we’ll have to wait for somebody to correct whatever I’ve omitted or done wrong. I also apologize if I misinterpreted your question and just gave you a lecture on something that you fully understand. :o

[wild, uninformed rambling]
My take on APR: it’s sort of an abstract number, since rare are the situations in which you actually accrue that percentage in finance charges over an entire year - compounding sees to that. However, it’s a fairly convenient benchmark for quoting interest rates (you could regard it as the DPR*365) and for comparing different terms to one another.

Monthly rates might be more relevant since that’s the period of compounding, but since months aren’t the same number of days the “MPR” isn’t a constant for all months. DPR is great, but nobody wants to try to deal with numbers that small: “I got a great loan at a daily interest rate of 0.0387%!” Quoting the numbers on an annual basis is simply more convenient.
[/wild, uninformed rambling]

Interest rate = rate charged to borrow money.

Annual Percentage Rate (APR)= Total annual cost of borrowing money.

The interest rate is vitually meaningless and cannot be used as a basis for comparison. APR includes any and all fees associated with the loan. It is the real “out of pocket” cost for the consumer and is the only basis for comparison. Lenders are legally obligated to advertise and quote APR instead of, or in addition to, interest rate.

An example:
I agree to lend you $1000 for one year at 8% interest. The application fee is $50 and the closing fee is $50. Your interest rate is 8%, and costs you $80 over the one year period. But the loan really cost you $180 because of the associated fees in addition to interest, so your APR is 11.8%.

Think of the APR as a way of forcing the lender to disclose any fees up front.

Visa and M/C operate in much the same way, but they are distinctly separate entities, with separate networks, personnel and facilities, and they see each other as competitors. Both are associations operated by their member financial institutions. “Visa” does not issue credit cards–it routes the transactions between the merchant’s bank and the bank that issued the card, and it sets the rules for processing. Mastercard does the same.

Visa’s roots are in Bank of America (“BankAmericard”), and M/C’s are in Wells Fargo Bank (“MasterCharge”). They’ve never been a single entity. In the early days, banks were exclusively signed up with one or the other, but for 20 years or so banks have been able to issue both.