Why MasterCard is Underperforming Visa Today

A court ruled today that bank fees may not have to be lowered as the market expected, which should be good for both Visa and MasterCard.

Mar 21, 2014 at 3:30PM

Stock markets were mixed today with little economic or earnings news to drive trading. The one notable news item in the last 24 hours was the Federal Reserve "stress test" finding that 29 of the 30 largest U.S. banks would be able to continue lending in a severe recession. The only bank to fail was Salt Lake-City based Zions Bancorporation.

As of 3:30 p.m. EDT the Dow Jones Industrial Average (DJINDICES:^DJI) was up 0.11%, while the S&P 500 and Nasdaq Composite were both down for the day.

Visa leads the Dow
Credit card payment processor Visa (NYSE:V) was up 0.75% today. Interestingly, competitor Mastercard (NYSE:MA) was down 2.9% on the day.

Visa Image Tmf

Visa cards could become more common if swipe fees are raised. Image owned by The Motley Fool.

A federal appeals court ruled today that the Fed was reasonable in setting debit card swipe fees, reversing a ruling last year that may have resulted in fees lower than the current $0.21 per swipe cap. What the ruling didn't do is end the court battle between retailers and banks that charge the swipe fees. The court said the law was written poorly and more clarification is needed to determine the appropriate cap.  

A pending appeal from retailers could go as high as the Supreme Court. For now, fees will stay where they are, which relieves some pressure Visa and MasterCard may have felt if the cap was lowered.

Why MasterCard is underperforming Visa today
You might think VIsa and MasterCard would rise together because both companies would benefit from higher swipe fees. But Visa would actually benefit more from the fees due to its higher market share in debit cards. If banks were forced to raise fees for consumers having debit cards, this could have meant a shift toward credit cards, where MasterCard holds a higher market share, or other payment methods.

That's why MasterCard isn't seeing the Visa's pop today. Whether the ruling will actually have a positive effect on Visa or a negative effect on MasterCard is yet to be answered. Remember that the court battle isn't over. For today, though, the market sees Visa as the big winner.

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Travis Hoium manages an account that owns shares of MasterCard and Visa. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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