The Federal Reserve's September meeting brought about a 50-basis-point cut to the federal funds rate, the first time the rate has been lowered since 2020. This provides immediate relief to customers looking to take out a mortgage to buy a home and businesses interested in securing a loan to fund their operations, among others.

The impact on the nation's credit card users is less clear. Across the U.S., household debt as of the second quarter reached an astonishing $17.8 trillion, $1.14 trillion of which is in credit card balances. While lowered interest rates more broadly could, in theory, mean a reduction to the APR on variable-rate credit cards as well, many of these cards have APRs in the range of 24%-25%. They are likely only to be minimally impacted by the latest rate cut. Indeed, APR margins compared with the prime rate have reached an all-time high in 2024.

Bad news for credit card customers carrying high debt loads is nonetheless positive news for the companies providing those cards and payment services, including Visa Inc. (NYSE: V) and Mastercard Inc. (NYSE: MA). The shares of these two companies were up about 21% and 26% in the last year.

Visa: Growth Prospects, But Mounting Legal Issues As Well

Visa is a $505-billion company and one of the largest transaction processing firms in the world. Therefore, it may be surprising to investors that the company also displays signs of growth potential.

Visa's forward P/E ratio is 27.9, which is high for many industries but still lower than the company's own long-term average for this metric. A price-to-sales of 14.5 is also lower than it has been for Visa in the past. Analysts expect Visa's earnings growth to come in at 11.7%, continuing its healthy and sustainable earnings improvement trend. Payment volumes increased by 7% year-over-year in the most recent quarter, and service data processing and international revenues also climbed. This is all because Visa shares trade is just below all-time highs, so it appears that the company has room for further growth.

At the same time, Visa has recently drawn a slew of negative headlines that could depress share performance, at least in the short term. In late September, the Department of Justice filed a civil antitrust suit against the company, alleging that Visa had engaged in unlawful monopolization of the debit network market. Visa shares tumbled by about 6% in response. Days later, a class action suit from merchants connected to this network followed.

Mastercard: Value-Added Services Gains Through Acquisition

Compared with Visa, Mastercard has a smaller—though still sizable—share of the U.S. credit card market and a less favorable forward P/E ratio. On the other hand, though, the company has recently made a key strategic acquisition that not only provides an important advantage compared to other credit card companies but also contributes meaningfully to its value-added services revenue, which comprises more than a third of its total revenue.

Mastercard's purchase of cybersecurity intelligence firm Recorded Future for more than $2.6 billion gives the company a massive head start on integrating AI in fraud detection and management compared with Visa and other competitors. Cybercrimes around the world cost an astounding $8 trillion last year, nearly a third of the U.S. GDP. Further, Recorded Future generates about $300 million in subscription revenue for its threat intelligence platform, which will be an added bonus for Mastercard's value-added services.

Mastercard's dividend yield of 0.53% is not likely to draw any investors searching for passive income streams on its own. However, the company has roughly doubled its dividend in the last five years, making it a boon for long-term investors as well.

V vs. MA: Which Comes Out on Top?

Visa and Mastercard are two leading payments companies that nonetheless have very different value prospects. Visa may take the lead in fundamental growth metrics. However, Mastercard's dividend history and recent acquisition make it a compelling choice as well. Investors don't necessarily need to choose one or the other, however, particularly given the existence of financial services-focused ETFs like the iShares U.S. Financial Services ETF (NYSEARCA: IYG).