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Moody’s sees upside in Visa, MasterCard settlement

In a file photo signs for MasterCard and Visa credit cards are shown at the entrance to a New York coffee shop Friday, April 22, 2005.


Moody's Investors Service has weighed in on the settlement made by credit card companies, in which they agreed to pay $6.6-billion (U.S.) to end a lengthy dispute with merchants – and the verdict is good.

"This settlement removes a major uncertainty for Visa Inc. and MasterCard Inc...." said Stephen Sohn, a Moody's vice president and senior credit officer, in a note released on Tuesday evening. "Without this litigation overhang, Visa and MasterCard could pursue more aggressive financial policies that will be key to any possible rating changes."

We pointed out in this space earlier in the week that credit card companies – particularly the big ones, Visa and MasterCard – seem unable to do wrong. Their share prices have more than fully recovered from the last financial crisis and they appear to be immune to any concerns about the global economy or dips in U.S. consumer spending.

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Now, with Moody's giving Visa and MasterCard the thumbs up in their settlement with merchants (to be fair, some analysts have also been pointing out the upside), there is yet another reason to feel bullish: They're impervious to multi-billion dollar payouts.

As part of the settlement, credit card companies have also allowed merchants to charge extra to customers who prefer to pay with plastic than cash. While Moody's believes that this could affect Visa and MasterCard's business volume, they don't expect a material impact.

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More


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