Better Buy: MasterCard or American Express?

• Report this Comment On November 28, 2009, at 5:57 PM, jlanganki wrote:

  MasterCard and Visa are lousy buys because they don't really have a sustainable business model. All of their profits come from transaction fees like this: you swipe your card at a retailer, and Visa/MasterCard get paid a fee of about 1-3%. The problem with this business model is it angers companies like Wal-Mart and Target that are forced to pay these ridiculous fees. This is why Visa/MasterCard are being constantly targeted with lawsuits and negotiations to reduce their fees. They're really getting paid way too much right now, so eventually this pyramid scheme will collapse. At least with American Express and Discover you're owning an actual bank which collects credit card interest fees. That's a more reasonable (and safer) business model.

• Report this Comment On November 29, 2009, at 12:56 PM, jdtsai wrote:

  jlanganki really should research how MasterCard and Visa make money before writing a comment on in public forum. Everything jlanganki is incorrect and his conclusions from a risk perspective are not even close.

  MC \ Visa makes their money on brand assessments (charging issuers for the use of the brand) and transactions fees, which DOES NOT INCLUDE the discount of 1 - 3%. If the 1 - 3% was accurate MC and Visa would generate hundreds of billions of dollars considering they process over a trillion dollars in volume annually. The 1 - 3% "discount" is actually called the interchange fee. This fee is primarily collected by the issuing bank from merchants and MC \ Visa receive no part of the fee.

  From a stock perspective Amex has huge credit risk from their credit products (ie Amex Blue), which is why they had to register themselves as a bank and receive a government bail out. MC \ Visa has NO credit risk and they have an unbelievable base of cash and checks to grow share from. Lets also not forget MC \ Visa are a true global company unlike Amex who has little acceptance outside the US. As for Visa or MC I would pick MC because Visa is a very expense stock from a shares outstanding perspective due their large IPO.

• Report this Comment On November 29, 2009, at 9:00 PM, raindrop123 wrote:

  I agree with jdtsai. Mastercard is far superior stock than either Amex or DFS, or even Visa. Just look at MA financial profile and the winner is obvious !

• Report this Comment On November 30, 2009, at 4:25 PM, Platnium1996 wrote:

  I would understand business models before making any assumptions concerning which is better AMEX or MC. These two companies have entirely different business models and for one to make the assumption that AMEX is not a Global Company is irresponsible. The strength in AMEX is not only on the Card side but in travel, B2B industry and the continued growth in network development.

  If I were to say one thing about MC it is just a monoploy whom takes advantage of the merchants and its customers. You could fit Visa in there as well.

• Report this Comment On November 30, 2009, at 5:06 PM, illegal33 wrote:

  jdtsai is directionally correct, with 1 error. The associations do receive a portion of the interchange fee. This euphamistically termed 'merchant discount rate' is split between the issuing bank (the lion's share because of the risk it carries), the acquiring bank (significantly smaller risk) and the association.

  Also, jdtsai's perspective on Amex's global reach is rather simplistic. It is extremely international, and highly diversified in terms of its product portfolio, much more so than the associations.

• Report this Comment On November 30, 2009, at 8:28 PM, mijhneerx wrote:

  AXP owns the payments system, the card and they have total control over their brand. As long as their cardmember underwriting is of high quality - AXP will always make money from this part of their business. Add the travel and leisure, share of corporate T&E, B2B, gift cards, strategic partnerships in card co-branding AND the incredible value of the Amerian Express brand name. My money goes with AXP.

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