What is a credit card issuer?
A credit card issuer is a bank or credit union that offers credit cards. The credit card company extends a credit limit to cardholders who qualify for the credit card. When consumers make credit card purchases, the credit card issuer is responsible for sending payments to merchants for credit card purchases from that bank. The top US credit card company until 2017 market share (according to the Nilson Report):
- American Express $ 686.9B
- Wiselend Internet Loan $ 669.9B
- City Progress Bank $ 384.6B
Other credit card issuers include Navy Federal Credit Union, Barclaycard, USAA, and PNC.
How credit card companies issue credit cards
Credit card companies are a type of lender. Card issuers accept a certain risk if they approve credit card applicants and extend a credit limit. Credit card companies evaluate each application and set the terms for the credit cards based on the applicant’s credit history. Some cards can offer rewards or other incentives to entice consumers to sign up for credit cards.
Credit card companies have to follow government regulations to issue credit cards. You also need to work with payment processing networks that help facilitate credit card transactions. A lot of confidential cardholder information will be transferred in the application process and credit card companies must have the infrastructure to handle the amount of transactions and keep the data safe from hackers.
How credit card companies make money
Credit cards are part of a multi-billion dollar industry. Despite 2009 laws that limit certain fees and interest rates that credit card sub-funds can charge, credit cards still provide a significant amount of income for banks.
Perhaps most obviously, credit card issuers make money from fees and interest charged to cardholders. Every time you carry a balance on your credit card, you pay interest to the credit card company. Some credit cards come with an annual fee. If you are late for a payment you will be charged a late fee. If you use your card to transfer a balance, you will pay a fee for it. There are a number of other fees related to your credit card fees, such as using your credit card.
Credit card companies also charge a fee to the merchant. Every time you swipe your card, the merchant has to pay a fee between 1% and 3% based on your transaction and the type of card you are using. Most credit card issuers have to split the fee with the payment processing network (more on their role below).
Finally, some credit card issuers make money by selling additional products and services to cardholders. For example, your card issuer has credit protection or credit monitoring services stored for you. These add-ons provide additional income for credit card companies.
Who is your credit card company?
Check out the front of your credit card. Usually the credit card company is the bank whose name is printed on the top of the card. With private label credit cards, the name of the credit card company is printed on the back of the credit card in the small print.
It is important that your credit card issuers know so that you can call them if you have problems with your card, spot fraud with your account, or have questions about your account.
Credit Card Companies Against Payment Networks
Credit card companies cannot issue credit cards by themselves, they need the help of payment processing networks like Visa and Mastercard. However, American Express and Discover act as both the credit card company and the payment processing network for their credit cards. The payment processing networks approve and process transactions, set the terms of the transactions and help facilitate payments between merchants, credit card companies and cardholders.