A credit card is one of the most commonly used modes of payment that enable its owners to borrow money from the issuer. It is usually issued by the bank or credit unions who take responsibility for the payments on behalf of the cardholder. A cardholder borrows money from the issuing bank, which he must return on the mutually agreed terms.
If you are a credit cardholder, you must have noted a unique set of numbers embossed in your credit card. A set of first six of these numbers is known as Bank identification numbers (BIN) and helps to identify which institution has issued a certain card. You can also find out the credit card issuer of any credit card by simply using the BIN Number Lookup.
Along with credit cards, this number system is also applicable to debit cards, electronic benefit cards, prepaid cards, gift cards, and charge cards.
Now that you have learned about who credit card issuers are, let’s take a look at how these institutions work.
How do Credit Card Issuers Work?
While credit card issuers offer their customers numerous benefits and rewards, they are also known for reporting cardholders’ history to credit bureaus and other information.
Issuing a customer credit card means that the credit card issuer has accepted the default risk and approved the application. A credit card is issued on a certain interest rate and fee that every customer must pay. In this way, a profitable relationship between the credit card holder and the issuer is formed in which each benefits the other, creating a win-win situation.
To help you understand better, we have given an example of a typical transaction process. It shows the role played by the credit card issuer in the transaction. Let’s understand each of the steps that are stated below:
- When the customer uses his credit card for a transaction, the merchant sends the credit card information to the payment processor.
- A request is submitted by the processor to the respective credit card issuer.
- The issuer then examines if the account is active, the availability of the requested amount, and other important things.
- Finally, the issuer approves or declines the transaction, and the final decision is sent back to the merchant.
What are Payment Networks?
You must have observed the names of multiple companies along with the card issuer’s name. Some primary names are Mastercard, Visa, Discover, and American Express. They act as middlemen, and the main responsibility of these companies is to process payments that are made to the vendors.
Payment networks are also responsible for administering the cardholder’s benefits on behalf of the respective credit card issuer. For instance, let’s say that a card issuer offers its customers rental car insurance, price protection policy, or warranty coverage. Payment networks will be responsible for the administration responsibilities of these perks.
Every customer should have comprehensive knowledge about their credit card issuers. And it is not limited to learning their name. You must also have an idea of what they do and what their major responsibilities are. Knowing about the credit card issuers, payment networks, and other important institutions will help you better understand your relationship with them.