Visa Credit Cards

Visa is among the world’s largest payment processors, only recently surpassed by Union Pay as the largest, although Union Pay serves the domestic Chinese market primarily, and their size is simply a matter of how big that market has become.

Visa is the largest processor that serves the worldwide market though, and also the world’s largest credit card processor. Visa does offer processing with Visa branded debit cards as well, a service that has really grown lately, as well as prepaid cards, but credit cards still drive the majority of Visa’s business.

Visa Credit CardsVisa’s brand as a credit card is so prominent that with Visa debit cards, people often get them confused with credit cards and they are often referred to as credit/debit cards. They are in no sense a credit card, but since Visa is so famous for their credit cards, this leads a lot of people to think that if their card has the Visa logo on it, it must be some sort of credit card. This is the case with the prepaid cards as well, often referred to as prepaid credit cards, even though that’s a contradiction.

Credit cards always involve purchasing on credit, where debit cards involve debiting some sort of account, usually a checking account, although this can include other types, including lines of credit, where credit is actually offered. The card itself doesn’t extend the credit though, as it takes money directly from the account selected, and that’s the difference between these two types of cards.

Another thing that a lot of people get confused about is who is extending the credit, and they think that Visa or other credit card processors are the ones that they are borrowing the money from, and they owe it to Visa.

This is never the case though, as the card is always owned and operated by the issuing bank or credit card company, and the only thing that Visa does is facilitate payments between the payee and the issuing bank.

This is an extremely important part of the process though. There are many, many banks that issue credit cards, and if they all had to make individual arrangements with every merchant themselves, that’s not even going to be practical even if they did want to go to all this trouble.

Processing fees would be higher as well under a fragmented arrangement, as having a major payment processor not only makes things much easier for the card issuers, it also makes payments more efficient.

The History of Visa

Visa started out as the BankAmericard back in 1958, in an attempt to offer people a card which would be accepted at a wide variety of merchants. Back then the trend was to only offer charge cards, cards that had to be paid in full at the end of the month, as well as only being able to be used at a limited number of locations.

In the mid 1950’s, several banks tried to get a general purpose credit card off the ground, but this was met with a lot of difficultly, and by the time Bank of America tried this, no one has been able to pull off the feat successfully.

So the Fresno, California market was chosen to launch BankAmericard, and they mass mailed 60,000 cards out to the people of Fresno, which had a population of about 250,000 people at the time. So this certainly saturated the market, and the goal was to drive the demand for it such that the majority of merchants in the area would come to widely accept it.

The test worked, and the project was expanded to larger centers, and by the next year Bank of America had sent out a total of 2 million BankAmericards state wide. The downside of all this was that by just sending these cards to people with no controls, the default rate was much higher than the 4% that the bank had forecast.

It ended up being 22%, and the bank lost a total of about $20 million from this initial rollout. However, the ground had been broken, and once the bank controlled access though people actually having to qualify for the card, it became enough of a success that the card started spreading to other states, and other countries as well.

At the time, banking restrictions prevented a bank from offering credit cards in other states, so this required that they license the use to these out of state banks. These banks were eager to get in on the action though, and around this time a new card called Master Charge started doing the same thing, formed by an association of several large California banks as a competitor and alternative to fellow Calfornia bank Bank of America’s card.

BankAmericard also became licensed in other countries, including Canada, the U.K, France, Japan, and Spain, where the card was offered with various brands and logos particular to each country. In Canada for instance, the card was offered as a Chargex card, in the U.K. it was known as the BarclayCard, in France the card was branded as Carte Bleu, and so on.

What brought all these brands together was the payment processing network behind it, and this part of the business eventually broke off from Bank of America and a separate company was formed to manage it, which is how Visa was born. Originally there were two companies offering the Visa service, Visa and Visa Europe, with the European company eventually merging with Visa Inc.

Visa Is Really A Credit Card Association

While Visa Inc. is a publicly traded company these days, independent of the banks that it works with, it still functions essentially as an association of banks that work together and bring their credit cards all under one easily recognizable and efficient umbrella.

So no matter what bank your credit card is with, and the credit cards themselves are completely owned by these banks, if it’s a Visa branded card, or rather, a Visa co-branded card, you can use it anywhere Visa is accepted in the world, which means virtually anywhere, including online.

Visa processes the transactions, as an intermediary between merchants and credit card issuers, and Visa performs this service for a fee. These processing fees do tend to be significantly higher than what is charged with debit cards, but merchants pay them because they want to accept Visa credit cards or the cards of other major credit card processors.

Visa only plays part of the role here in the processing, moving money between the different banks involved in a transaction, the bank where the money is coming from, the issuing bank in other words, and the merchant’s bank where the funds are being sent to complete these payments.

The lion’s share of these processing fees goes to the bank that issued the card actually, although Visa does capture a percentage of the fees for themselves. This arrangement allows credit card issuers to offer generous rewards to their cardholders as an incentive to use them, and that’s where the rewards come from, not Visa, although Visa does make a lot of money out of the deal, due to the sheer volume of transactions that they process.

Visa now processes over 100 billion transactions each year, adding up to almost $7 trillion. So when you do $7 trillion worth of business, you don’t need much of a cut to make a lot of money. Visa’s net income these days is over $6 billion a year, which makes them a large and profitable company indeed.

Due to the business being essentially an association of sorts, Visa has been embroiled in several anti-trust actions against them, which isn’t unusual given their massive size and market share. When you control about half the market of something, as Visa does with credit card payments, this is going to give you a lot of power over merchants, and sometimes merchants band together to use anti-trust laws to leverage better rates from them, and we have seen some of this.

Visa Is Essentially A Technology Solutions Company

Visa these days is more of a technology company than anything else, rather than a financial company, and in fact they are completely separate from the financial end of things, and have been since they broke off from Bank of America in the 1970’s.

As technology in financial transactions has developed over the years, from the days where it was all done by telephone and on paper to today’s highly sophisticated automated systems and networks, Visa has of course stayed on the cutting edge of things, as this is really their stock in trade.

Aside from the seamless integration of transferring payments, Visa also provides security technology, and security is a major issue these days with credit cards, more so than ever. So Visa provides many measures which offer digital security, which looks to identify patterns that may indicate a higher risk of fraud, from something as simple as someone using a card in another country without identifying anyone, to some much more complex algorithms.

Visa also offers card based technologies such as Visa Contactless, formerly known as Visa PayWave, which uses RFID technology to allow for contactless payments.

Visa also offers Visa Checkout, which allows for the use of their cards for payments without sharing your credit card information with individual merchants, similar to what PayPal provides.

Visa also provides administrative support to its card members, including a set of rules that apply to all, as well as organizing certain member benefits across banks. They also provide additional security features on cards such as holograms and chips.

Visa is also well known for its support of sporting events, especially the Olympic games, and since 1986 it is the only card accepted at both Olympic and Paralympic games.

Together with their main competitor MasterCard, they facilitate the bulk of credit card transactions worldwide, and the original idea behind it, being able to use a single card for everything, anywhere, has certainly flourished.

Visa FAQs

  • What is the best Visa credit card?
    Many banks and non-bank credit card companies offer Visa credit cards, with different features and benefits as well as costs. Some Visa credit cards specialize in certain types of rewards, where prospective cardholders would shop among them to find the best one for their needs and habits. There are other factors that also need to be considered when making a choice of Visa.
  • Which is better Visa or Mastercard?
    Visa and MasterCard are both just payment processors, and are also both almost universally accepted around the world. Both are extremely capable at what they do, which is to send money from the issuer of your Visa to merchants. Credit card companies that issue them decide what features the cards will have and which is best for you will come down to this fit.
  • Are all Visa cards credit cards?
    Visa offers payment processing for credit cards, debit cards, and prepaid cards. All of these cards come with Visa branding and their logo which indicates that Visa is the company that will process any payments made from the card that they are associated with and send the funds to their destination.
  • What banks use Visa credit cards?
    Banks will either issue their credit cards with Visa or MasterCard branding. Since Visa is more widely used than MasterCard, the selection of banks that offer them is a broad one. Among the larger banks that issue Visa credit cards are JPMorgan Chase and Bank of America, as well as leading non-bank credit card issuer Capital One.
  • Is Visa considered a credit card?
    A credit card may use Visa to handle payments made from the credit card to merchants, but Visa itself does not own any credit cards nor do they offer credit. The bank or other institution that issued the card is the credit grantor, where they just use Visa to help them manage the financial transactions with their credit cards.
  • What is difference between Visa and Master Card?
    From the perspective of what Visa and MasterCard does, they are very similar, and both charge similar fees for their services, which are paid by the merchant. Some merchants may only take one or the other but these are exceptions and both cards are accepted by the vast majority of merchants as to not lose business from customers that only have one type.
  • Who owns Visa card?
    Visa is not a card but a means to make payments with cards, even though people will often refer to them as Visa cards. If you have a Bank of America Visa for instance, the card is a Bank of America credit card that uses Visa as a payment processor. The Visa brand and its network is owned by Visa Inc., headquartered in Foster City, California.
  • Can I use a Visa debit card as a credit card?
    A debit card can only be used for debit purchases, by definition. Only credit cards can be used as credit cards. However, a debit card bearing the Visa logo can be used to make payments where normal debit cards cannot be used, such as online. Visa will arrange payments directly from your bank account to the merchant provided that they accept Visa as payment.
  • How do I pay with Visa card?
    Payments with cards that bear the Visa logo and therefore use the Visa payment network can be used to make electronic payments to merchants that have a Visa merchant account. This can be done in person by using your Visa card at a terminal, the card information may be given over the phone, or inputted online.
  • How do I register my Visa card?
    Visa credit cards do require that they be registered with the credit card company that issued it, as confirmation that you have received your card and you are ready to start using it. This process is called activating the card. This is generally done over the phone although you don’t generally need to speak to a real person anymore as the process is now automated.
  • How do I check my Visa card balance?
    Monthly statements are compiled for all credit cards, which can either be viewed online or mailed to you. These statements only provide a snapshot balance of posted transactions on the statement date, and therefore if you want an up to date balance including all transactions since then, you can receive this information through the card’s online site or over the phone.
Ken Stephens

Chief Editor,

Ken has a way of making even the most complex of ideas in finance simple enough to understand by all and looks to take every topic to a higher level.

Contact Ken: [email protected]

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