Revolution Money, an internet-payment company started by AOL co-founder Steve Case that also offers a credit card, has raised $42 million from Goldman Sachs, Citigroup and Morgan Stanley. The round follows a second round of $50 million raised in 2007 by Citigroup, Morgan Stanley, Deutsche Bank and a number of individuals, including Case (through his investment entity Revolution LLC). 

SEE ALSO: Steve Case, Ted Leonsis Launch Online Credit-Card Firm Revolution Money; $50 Million Second Round

Revolution Money competes with peer-to-peer payment providers like PayPal as well as credit-card companies, but lets users transfer payments to each other for free (PayPal charges) and charges merchants that accept its card smaller fees than competitors like Visa and MasterCard. The company said its card is accepted at over 650,000 merchants in the U.S. 

Revolution is competing against entrenched credit-card companies and a well-established player in the online payment business in PayPal. But if it is able to carve out even a small niche with its service, the returns could be huge. Revolution recently struck a deal with Chase bank that allows its credit card to be used for internet purchases as well as at brick-and mortar retailers. Revolution’s Chairman Ted Leonsis said an IPO or sale isn’t on the table in the near-term, but could happen after 2011.