For many people, credit cards have become an integral part of our financial lives, offering a convenient way to make purchases as well as giving people access to credit. Behind the scenes of credit cards though, are the financial institutions called credit card issuers.
Credit card issuers are lenders. These are credit unions or banks, like Chase, that take on the inherent risk of lending unsecured credit to consumers. When you apply for a card, you do so through the issuer.
In this article, we’ll explore what issuers do, why they’re important and how you can identify the card issuers of the cards in your wallet.
What do issuers do?
Credit card issuers have many functions. Below is a list of their primary responsibilities:
- Pay the merchants: The issuer is responsible for paying for the transaction on behalf of the cardmember.
- Collect payments from the cardmember: When a cardmember makes a purchase, the issuer processes the transaction and keeps a record of the outstanding balance. At the end of each billing cycle (generally once a month), issuers will send credit card statements to cardmembers with the minimum balance they owe, and offer various ways for the cardmember to make that payment. If a cardmember does not make the minimum payment, or misses the due date, interest charges will accrue or fees may be added to your statement. Keep in mind that interest charges will also accrue even if the cardmember pays the minimum amount. You can only avoid interest charges if you pay off the entire balance every month.
- Approve or deny credit card applications: Issuers assess the creditworthiness of applicants. They decide who qualifies for a credit card by evaluating credit reports, income and other factors.
- Set the terms and conditions of the card: Issuers establish the terms and conditions of the card. These are the terms that cardmembers must agree to in order to use the card — including interest rates, annual fees, credit limits and rewards programs. These stipulations may vary from cardmember to cardmember, depending on the evaluation of their credit. The terms may also vary from issuer to issuer.
- Decide the benefits, features and rewards: Issuers determine what benefits, features and rewards programs they will offer their cardmembers. This could include things like insurance, reimbursem*nt for certain memberships, travel perks, and the ability to earn and redeem rewards points.
- Distribute cards to approved applicants: Issuers create and distribute the physical plastic credit cards to approved applicants.
- Provide customer service: Issuers provide customer service to address any inquiries, disputes and account management.
- Report consumer activity to bureaus: Issuers regularly provide information about cardholders’ account activity to the three major credit bureaus which are Experian™, Equifax® and TransUnion®. The information they report includes things like the cardholder’s credit utilization and payment history.
Why are credit card issuers important?
Credit card issuers play a pivotal role in the financial ecosystem for several reasons:
- Access to credit: They provide access to credit to those who are approved, which allows people to make purchases, pay bills and manage unexpected expenses. They offer a flexible and readily accessible source of funds.
- Credit building: Responsible use of credit cards can help people establish or improve their credit history and credit scores. This may open the doors to favorable terms on loans, mortgages and other financial services.
- Make it possible for merchants to get paid: By accepting credit cards as a payment option, merchants can feel confident they will be paid without having to send invoices or have to establish relationships with every bank their customer uses. Issuers pay the merchants up front while they wait for the cardmembers to pay them back.
- Consumer protections: Issuers often provide certain consumer safeguards, such as liability limits and protections against unauthorized purchases. In addition, they offer ways to dispute and resolve cardmember concerns.
How do I know my credit card issuer?
If you’re unsure who your credit card issuer is, you can always look for the logo that will be prominently displayed on the front of your credit card. On the back of the card, you’ll find a customer service number which you can call to inquire about your account or any questions you have about the issuer. You can also review your monthly statements, which will show the issuer’s name and contact details.
You’ll want to note that there is another logo on your card that identifies the credit card network, which is different than the issuer. The four major credit card networks are Visa®, Mastercard®, American Express® and Discover®. Two of these, American Express and Discover, serve as both the network and issuer. Whichever network your credit card uses will have that logo prominently displayed on the front of your card, likely near your issuer’s logo.
Credit card networks are facilitators. They facilitate transactions between merchants and card issuers. These network companies create virtual payment infrastructures in which merchants can receive their payments.
In summary
Credit card issuers are the financial institutions responsible for providing consumers with credit cards and managing the associated financial transactions. They play a crucial role in making credit accessible, paying merchants and offering consumer protections. They also provide credit bureaus with information about your card activity.
