Credit cards are a feature of everyday finance. There were nearly 260 million purchases worth more than $ 28 billion made with about 18 million personal credit cards in Australia as of February 2020 alone, according to the Reserve Bank of Australia. To serve this enormous market, there are hundreds of different types of credit card packages available through financial institutions, each with unique benefits and costs.
However, most credit cards look the same - rectangular pieces of plastic with numbers on them. And more often than not, these cards will be branded with the Visa or Mastercard brand logo.
So what's the difference - what do Visa and Mastercard do?
The logos of these two companies make up the largest share of credit cards in Australia - about 83% of all payments made in June 2019 were for cards branded with one of their logos, according to Statista.com. However, these companies have little influence over the actual credit card products and benefits that users may end up registering, as:
They are simply digital payment platforms - they simply provide a system that allows payment transactions to occur rather than distributing the cards themselves.
They do not issue credit cards, and therefore do not specify, for example, how much interest you will be charged on outstanding balances, or what types of points you would earn if your card was attached to a rewards program. The issuing bank decides on these things.
Credit cards from both platforms are accepted almost the same anywhere in the world.
However, there are some minor differences between the two payment platforms.
Some banks and outlets have "exclusive" arrangements with one payment platform over another. For example, in 2015 the National Australia Bank signed a 10 year agreement with Visa which means that until 2025, bank customers will only be offered a Visa credit card.
The “Benefit” program - a facility put into the card by Visa or Mastercard before the issuing bank enforces its terms - is a little different. See under the “What is a premium credit card” section for more information. Mastercard has a “standard Mastercard” offering, along with a higher level of benefits - Platinum, World and World Elite - while Visa has a standard offering with additional benefits available with Gold, Platinum, Signature, and Infinite packages. However, banks can change these terms and / or offer their own benefit plans, so it's best to check the benefit package terms on each credit card product the bank offers before making a decision.
Visa or Mastercard: If they're all about the same, how do you choose the right credit card?
The Australian credit card market is a rather complex one, with hundreds of different types of packages offered from financial institutions, each with its own set of benefits and terms. In terms of choosing the right credit card for your needs, you can start by assessing:
What will you use it for: Is it a one-time purchase? Or are you going to buy things regularly? Different cards suit different uses (as discussed in more detail, below).
Your capacity to pay back any accumulated debt: Paying for items in "credit" on the card actually means you borrowed money from a financial institution - it becomes debt. The bank will attach a series of conditions to pay the debt, such as charging interest and expecting payment to be made by a certain deadline if you want to avoid additional fees. Interest rates on credit cards are usually much higher than for other types of debt products, such as personal loans or home loans. It's good to compare other types of loans to the long-term costs of having a credit card.
If you're going to use a credit card added benefit: Take a look at the card pack rewards program and other benefits it offers, such as insurance on items purchased.
What credit cards, packages and offers your preferred bank offers and how do those packages compare to other markets.
It's also a good idea to research the different types of cards available, and what features they offer.
What types of Mastercard and Visa credit cards are available from lenders?
While there are many types of cards available with the Visa or Mastercard logo, most can be classified as belonging to this broad consumer category, which Canstar uses when assigning its Star Rating:
Premium - for consumers who want a card that offers more benefits and frills than a more basic credit card, such as access to concierge services or free travel insurance
Rewards - for those looking to get a return from their daily expenses, in the form of a cashback, gift card or lifestyle gift, for example
Frequent flyer - suitable for those who wish to be able to redeem card points for flights
Low rates - for those who want low rates and flexible payment conditions
Low cost - for those who want low ongoing costs and potential access to some premium features
Balance transfer - for those who wish to transfer outstanding balance from one card to another.
Below is a brief description of each of these card types, and - to give you an idea of what the various financial institutions have to offer - some of the credit card options available on Canstar's database.
What is a premium credit card?
Ever wondered what a "Platinum" or "Signature" credit card is? This label and other names - such as "silver", "gold", or "black" - tend to indicate that the card is part of a bundled package by banks (sometimes linked to Visa or Mastercard) that offer more perks than standard credit cards. . This type of card is commonly known as a "premium" card.
While premium cards offer more benefits than standard cards, they also usually charge users more in the form of fees and / or higher interest rates charged on outstanding balances. In many cases, these cards are also only available to higher income and higher spending customers.
Additional perks can include things like travel insurance when you go overseas, inconvenience coverage if your domestic flight is canceled or concierge services that can perform tasks like booking tickets and making reservations.