What Is a Credit Card Network?

Definition & Examples of Credit Card Networks

Woman on phone examining credit card
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A credit card network authorizes, processes, and sets the terms of credit card transactions, as well as transfers payments between shoppers, merchants, and their respective banks. 

Understand how payment transactions are processed and where your card is (or isn't) likely to be accepted to make the most of your plastic purchases. 

What Is a Credit Card Network?

When you dip, tap, or swipe your credit card to make a store purchase or enter your card number online, you're requesting that your card issuer pay the merchant. But that payment first has to go through a credit card network.

Credit card networks pass information between the merchant’s acquiring bank and an issuing bank or card issuer (the financial institution that issued you a card on behalf of a network like Mastercard or Visa) to decide if you can make a purchase or not and to facilitate the purchase.

The Visa and Mastercard networks cover credit cards, debit cards, prepaid debit cards, and gift cards. The American Express network includes credit cards, gift cards, and prepaid debit cards only, while Discover’s network includes credit cards as well as debit cards via its cashback checking account.

How Credit Card Networks Work

While these payment networks operate behind the scenes, the process is fairly straightforward. Below is a step-by-step example of a credit card network’s function when you use your card to make a purchase. 

  1. To pay for a $50 haircut, you swipe or dip your card at Lola’s Hair Salon point-of-sale system (POS), using an ABCD Bank Visa. 
  2. Lola’s POS transmits your card information and the dollar amount to Lola's bank (the acquiring bank). 
  3. That bank then sends the request to your card’s network, Visa.
  4. The Visa network then electronically "talks" to your card issuer, ABCD Bank, to determine whether to approve or deny the transaction.
  5. ABCD Bank approves the transaction, and the network transmits the approval back to Lola’s POS system. The card issuer charges you $50 for the transaction and Lola’s bank receives $50 (minus fees). 

The whole process is fast-paced, taking place within seconds. 

Types of Credit Card Networks

There are four primary companies that act as credit card networks for payment processing:

  • Visa: This is a payment network only; that is, it doesn't issue credit cards directly to consumers, though you will see the Visa logo appearing on many cards to identify their association with the card's payment network. Visa also oversees the Visa Signature benefits associated with certain credit cards, such as premium rental car privileges and hotel perks.
  • Mastercard: Again, this is only a credit card network. But it has its own suite of card protections and benefits, such as identity theft protection and extended warranties.
  • American Express: American Express is a credit card network and card issuer that both issues credit cards and processes payments for cards bearing its logo. It also offers cardholder benefits like travel insurance.
  • Discover: It's both a card network and card issuer offering benefits like secondary rental car collision insurance.

When shopping at a new store or in an unfamiliar place, investigate which credit card networks are accepted beforehand. Consider keeping multiple (and different) cards from different card networks, or just plain old cash, in your wallet so you always have a backup payment option. And keep in mind: Retail store credit cards may operate on their own, smaller credit card networks, limiting you to making purchases with your card only at those stores.

Why Your Credit Card Network Matters

The payment network your card operates is important because merchants aren't required to accept credit cards from every payment network. A grocery store or gas station may accept Mastercard or Visa but not American Express or Discover credit cards. And if you’re traveling, card networks overseas may vary from what you’re used to in the U.S. If you routinely spend money at the same merchants or have multiple credit cards operating in different card networks, that may not be a problem. But if you’re planning to travel outside of the U.S. and only have cards from one network like American Express, view online maps of acceptance locations on the card network website.

Acquiring banks incur interchange and other fees to process card payments, so merchants sometimes choose and accept credit card networks based on cost. Fees vary, but some networks are more expensive for merchants to use than others. American Express, for instance, tends to charge higher fees than its competitors. If a retailer is keeping a close eye on the bottom line, it may opt to accept payments only on low-fee card networks. This might be a money-saver for them but inconvenient for you. 

Key Takeaways

  • A credit card network handles the authorization and processing of credit card transactions.
  • These networks transfer information between acquiring and issuing banks to facilitate transactions.
  • There are four major credit card networks, and the network your card operates in dictates with whom and where you can transact with a credit card.

Article Sources

  1. FDIC. "Credit Card Activities Manual - Chapter XIX. – Merchant Processing." Accessed June 16, 2020.

  2. Office of the Comptroller of the Currency. "Merchant Processing," Pages 6–8. Accessed June 16, 2020.

  3. Visa. "Visa Signature Credit Cards," Accessed June 16, 2020.

  4. Mastercard. "Mastercard Guide to Benefits," Pages 2–4. Accessed June 16, 2020.

  5. Office of the Comptroller of the Currency. "Merchant Processing," Page 2. Accessed June 16, 2020.

  6. American Express. "Retail and Travel Benefits." Accessed June 16, 2020.

  7. Discover. "Description of Coverage," Page 4. Accessed June 16, 2020.

  8. University of Pennsylvania Carey Law School. "What’s in Your Wallet (And What Should the Law Do About It)," Page 553. Accessed June 16, 2020.