The credit card industry has four big-name competitors, MasterCard and American Express are two of them (the others being VISA and Discover). The Nilson Report says that in 2006, VISA led the pack with 44% of the US credit card share, followed by MasterCard with 31%, American Express with 20% and Discover with 5%. With VISA staying in first place, as it has for awhile, and Discover decidedly in last place, the competition in the middle is of some interest.

The year 2006 was the first year in which consumers paid for more purchases with cards than with cash or checks. That means that the choice of card affects a lot of people and a lot of transactions. What's to choose between American Express and MasterCard? This article will show you some of the differences.

Roots

American Express and MasterCard have decidedly different backgrounds. American Express had its beginnings over one hundred and fifty years ago as an express business, when there was a merger of three express mail companies. You may not know one of them—Butterfield, Wasson & Company—but the names of the other two, Wells & Company and Livingston, Fargo & Company, may ring a bell.

Well and Fargo, partners in the express companies that joined to become American Express, were also the first president and vice-president respectively of the new organization. Yet, when they felt that the board of American Express was missing the boat on opportunities they created Well, Fargo & Company as a  joint-stock association. This explains the similarity in names and directions of the two companies.

American Express developed in a number of directions, as the country developed. It affiliated with other express companies and other types of transportation; it introduced a money order business (1882) and traveler's checks (1891). And in 1958, it introduced a charge card with an annual fee ($6) to compete with Bank of America's BankAmericard (later to become VISA). MasterCard has a much shorter and more straight-forward development, since it was started in 1966 specifically to compete with Bank of America's successful card.

In-Fighting

MasterCard  had blocked its client banks from issuing American Express cards. So had VISA. American Express sued both companies in 2004 and won. Discover also sued MasterCard and VISA in 2008 on similar grounds, and it also won. These lawsuits have both resulted in large settlements as well as opened the door for the second-tier cards to gain a greater share of the market.

Services

MasterCard licenses its brand to banks, which use the brand to issue co-branded cards. MasterCard collects license fees and transaction fees. The cards include a variety of credit and debit cards. Other services offered under the MasterCard brand include loyalty rewards, emergency travel assistance, prepaid cards (including gift cards). MasterCards are specially designed for several groups of customers: consumers, students, small businesses, mid-sized businesses, corporations, and public sector agencies.

American Express, which at the end of 2008 became a bank-holding company, offers charge cards, credit cards, travelers checks and special pre-paid travel cards, an extended list of travel services, small business cards, and corporate cards, and a variety of rewards programs.

A Few Other Points

If you want a debit card, obviously you'll go with MasterCard because American Express doesn't offer debit cards (as of early 2009). But consider this: In a Credit Card Satisfaction Study based on a 1000 point scale conducted by J.D. Power and Associates in 2008, American Express was the number one card company with a rating of 783. Even though the MasterCard satisfaction was divided up by the co-branding bank, the closet bank score was 721. How much does it matter? That's up to you . . .

Disclaimer: This content is not provided or commissioned by American Express.  Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express.  This site may be compensated through American Express Affiliate Program.