MasterCard, Visa & American Express: Same, Same — but Different

"Volatility is the price of admission. The prize inside is superior long-term returns"

– Morgan Housel, Author of “The Art of Spending Money”

Mid-Terms

With the start of 2026, we are now right in the middle of the U.S. mid-term cycle — historically the most volatile phase of a four-year presidential term (chart 1).

Why?

The main culprit is political noise. As politicians fight for votes, uncertainty rises — and as we know, uncertainty is the kryptonite of the stock market. Markets hate it.

The usual playbook is familiar: target sectors that sit under public scrutiny or touch voter pain points — think insurance, healthcare, or consumer finance.One such hot-button issue?

Sky-high credit card interest rates.

Just last weekend, President Trump pushed for a one-year 10% cap on credit card rates (currently uncapped and often running between 20–30%) to “protect the consumer.”

Inevitably, anything related to credit cards moves into the spotlight.

The businesses that immediately come to mind?

American Express (AmEx).

Mastercard.

Visa.

Chart 1: S&P 500 Average Performance Mid-Term Years vs All Years (1946 – 2021)

Same, Same — but Different

Let’s start with a banger. And a quick reminder.

Contrary to popular belief, Visa and Mastercard do not issue credit cards. They provide the payment settlement network. In other words, they process the transactions you make — nothing more, nothing less.

This means they have very little exposure to credit risk from cardholders who don’t pay their bills. But they benefit massively when consumers spend more. This model is known as “open loop” (chart 2).

Limited downside. Significant upside.

American Express, on the other hand, does issue credit cards — just like banks such as JPMorgan, Bank of America or both UBS as well as ZKB in Switzerland. That means AmEx carries the risk of cardholders not paying their bills.

In return, it earns interest on late payments — sometimes up to a whopping 29.99%. This is called a “closed loop” model (again, chart 2).

That means AmEx doesn’t just earn from transaction fees on the network. It also generates revenue from interest income, annual fees, foreign exchange fees, and value-added services like fraud prevention and data analytics.

More downside — but even more upside.

That said, the primary revenue driver for all three companies is still the same: the payments you make with your card.

How does that work?

For each transaction, they earn roughly 0.15% to 0.30% of the purchase amount (AmEx charges more). So, on a $100 purchase, they collect between $0.15 and $0.30 — whether you pay online or in-store.

Now you might ask: why doesn’t everyone accept AmEx? Or why do merchants often nudge you toward using a different card, especially in Switzerland?

Simple.

AmEx charges the highest fees. And across hundreds or thousands of transactions, a penny saved is a penny earned.

So yes — the payment networks are same (MasterCard), same (Visa), but different (American Express).

Now, with President Trump pushing to cap interest rates, the question is: what problem is he addressing — and what could happen next?

It touches a core pillar of what many call the American Dream.

Let’s dig in.

Chart 2: Business Model and Differences of MasterCard, Visa and American Express

The American Dream/Way – If We Go, We Go All In

The growth case for these three businesses rests on two pillars.

First, they benefit from the powerful and irreversible shift toward cashless payments, expected to grow around 20% annually in the coming years. One interesting nuance: Mastercard often trades at a modest valuation premium to Visa due to its higher exposure to faster-growing emerging markets.

Second, growth depends on the consumer — and how much they spend in everyday life.

The first pillar is structural. One day, physical cash will likely disappear altogether.

The second is cyclical — more volatile and a direct reflection of consumer confidence and behavior.

While the move to cashless payments is sticky and inevitable, consumer spending is constantly under scrutiny — by economists, businesses, markets, and, of course, politicians.

This is where the American Way enters the picture. A person can spend three things: their salary, their savings, and their future income.

That last component is credit — the lifeblood of the US economy.

The mindset here is fundamentally different from Switzerland. Americans tend to spend, not save. In Switzerland, friends remind each other to contribute to their Säule 3a before year-end to save taxes (available at arvy alongside regular investing — and planned, the Kinderkonto) — and feel guilty if they miss a year. In the US, many live paycheck to paycheck.

As the saying goes: when in Rome, do as the Romans do.

A large share of economic activity depends on debt — student loans, auto loans, and especially credit cards (chart 3) – it is the American Way. About 46% of cardholders carry balances month to month, which explains why delinquency rates — and the proposed 10% interest-rate cap — have become political flashpoints.

The problem?

If credit card providers are forced to cap interest rates at 10%, they will quickly reduce risk and exclude millions from traditional credit. But here's the key point: consumers will not stop consuming. They will adapt.

That spending does not disappear — it migrates. The most obvious destination?

Buy Now, Pay Later (BNPL).

Political pressure on credit cards becomes a structural tailwind for BNPL adoption. We already saw record BNPL usage during the holiday season. Demand is there.

Risk-taking and leverage are deeply embedded in the American Dream. Airbnb’s founders famously kept the company alive by juggling 36 credit cards. Today, it is an $80 billion business.

The rails change. The behavior doesn’t.

So, what does Mr. Market say about the latest noise?

Spoiler: we don’t care.

Chart 3: Delinquency rates of student loans, credit cards and auto loans

Political Stock Markets Have Short Legs

Let’s never forget that over the long run, stock prices follow fundamentals.

In fact, over the past three decades there has been a 0.98 correlation — almost perfect — between the S&P 500 and its earnings growth.

The short term, however, is dominated by noise. And that includes this year’s political noise surrounding the 2026 mid-term elections. We agree with the saying: political stock markets have short legs.

However, the long run is all about profits.

That’s exactly why we at arvy stick to our “Good Story & Good Chart” investment philosophy — owning businesses that deliver both fundamentally and technically in a steady, visible, and as predictable-as-possible way over time. In our view, quality is the only true hedge against uncertainty.

A key ingredient in this approach is patience. And knowing what businesses we own — and why we own them — makes navigating emotional pitfalls, clickbait headlines, and bad news much easier.

Mastercard and Visa — both in our portfolio for seven years — pass the test.

Speculators chase noise. Investors follow profits.

Remember that throughout 2026.

Chart 4: MasterCard, Visa and American Express over the last ten years