What is a Credit Card Issuer?
A credit card issuer is a bank or credit union who offers credit cards. The credit card issuer 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 purchases made with credit cards from that bank. The top U.S. credit card issuers by 2017 market share (according to the Nilson Report):
- American Express $686.9B
- JPMorgan Chase $669.9B
- Citibank $384.6B
- Bank of America $332.9B
- Capital One $288.7B
- U.S. Bank $136.1B
- Discover $128.8B
- Wells Fargo $125.8B
Other credit card issuers include Navy Federal Credit Union, Barclaycards, USAA, and PNC.
How Credit Card Issuers Issue Credit Cards
Credit card issuers are a type of lender. Card issuers accept a certain amount of risk when they approve credit card applicants and extend a credit limit. Credit card issuers evaluate each application and set the terms for the credit cards based on the applicant's credit history. Some cards may have rewards or other incentives to entice consumers to sign up for credit cards.
Credit card issuers have to follow government regulations to issue credit cards. They must also work with payment processing networks who help facilitate credit card transactions. Lots of sensitive cardholder information is transferred in the application process and credit card issuers must have the infrastructure to handle the amount of transactions and keep the information safe from hackers.
How Credit Card Issuers Make Money
Credit cards are part of a multi billion dollar industry. Despite 2009 legislation that limited certain fees and interest that credit card issuers can charge, credit cards still continue to provide a substantial amount of income for banks.
Perhaps most obviously, credit card issuers make money from fees and interest charged to cardholders. Whenever you carry a balance on your credit card, you pay interest to the credit card issuer. Some credit cards come with an annual fee. If you're late on a payment, you'll pay a late fee. If you use your card to transfer a balance, you'll pay a fee for that. There are a number of other fees your credit card charges based on how you use your credit card.
Credit card issuers also charge a fee to merchants. Each 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're 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 may have pitched credit protection or credit monitoring services to you. These add-ons provide additional revenue for credit card issuers.
Who Is Your Credit Card Issuer?
Look at the front of your credit card. Usually the credit card issuer is the bank whose name is printed at the top of the card. With private label credit cards, the name of the credit card issuer is printed on the back of the credit card in small print.
It's important to know your credit card issuer so you know who to call if you're having trouble with your card, spot fraud on your account, or need to ask questions about your account.
Credit Card Issuers vs. Payment Networks
Credit card issuers can't issue credit cards all 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 issuers and the payment processing network for their credit cards. The payment processing networks authorize and processing transactions, set the terms of transactions, and help facilitate payments between merchants, credit card issuers, and cardholders.