Credit card issuer vs. network of
We all know that credit cards are an extremely convenient way to pay for things. All you need to do is swipe or tap that piece of plastic at your favorite store, and your item is paid for when you pay off your cómputo! Sounds pretty fácil, right? However, behind the scenes things are a bit more complex.
There are two very important parts that are often overlooked, but they are critical to making sure your credit card transactions go smoothly. They are called credit card issuers and networks of Credit cards and they’re involved every time you use your card. These issuers and networks work quickly and seamlessly behind the scenes to process the payment.
While both are importante for processing credit card transactions, there are vital differences between the two. This article will detalla what you need to know about both parties, including:
- What are credit card issuers?
- What are credit card networks?
- How do credit card networks and issuers work together?
What are credit card issuers?
Credit card issuers are lenders. These are banks, like Chase, that are financially responsible for the card. Card issuers bear the inherent risk of lending unsecured credit to consumers. When you apply for a card, you do so through the issuer. Here are some things credit card issuers do:
- Approve or deny credit card applications
- Equipo card terms and conditions
- Escoge the benefits and features of the card
- Pay transactions on behalf of the usuario
- Collect cardholder payments
- Provide customer service
What are credit card networks?
Credit card networks are facilitators. They facilitate transactions between merchants and card issuers. Credit card networks create virtual payment infrastructures where merchants perro receive their payments. The networks then charge the merchant an interchange fee (or swipe fee) for processing a consumer transaction.
The four major credit card networks are Visa, Mastercard, American Express, and Discover. Two of them, American Express and Discover, serve as network and issuer. Chase primarily emplees Visa as its network, but also offers a couple of Mastercard credit cards.
Not all merchants accept credit cards from all networks. Before you begin your purchase, be sure to ask if the card you plan to use is accepted. You may see logotipos accepted at en línea checkout or physical signs near the store entrance or checkout area.
How credit card networks and issuers work together
For merchants to process purchases made by consumers, networks and issuers must work together.
The transaction goes through two stages:
- The credit card network processes the payment. The network will verify with the issuer that the card is active and has sufficient funds available to cover the transaction.
- The credit card issuer pays the merchant. The issuer is responsible for paying for the transaction on behalf of the cardholder.
Let’s see an example. If you were to use your Chase Freedom Unlimited® to buy groceries at a store, there would be four parties involved in this transaction: the cardholder, the merchant, the network, and the card issuer. Here’s the step-by-step breakdown, all of which happens in a matter of seconds:
- You, the consumer, pay for your groceries at checkout by swiping, tapping or inserting your Chase Freedom Unlimited card.
- The store, known as the merchant, sends the transaction to the network. In this case, the network is Visa.
- Visa then sends the transaction to the card issuer, Chase.
- After reviewing the transaction, Chase approves or denies the purchase and sends that decision to Visa.
- Visa informs the merchant of the decision, and this is when your charge will be approved or denied at checkout.
- This transaction is added to your credit card statement and the amount is deducted from your credit limit.
Even though this entire process happens almost instantly after you swipe or tap your card, there are many important steps that take place behind the scenes to ensure your transaction is processed correctly and securely.
Ideally, you have a diverse selection of credit cards from multiple networks and issuers, so you’ll always have one that works no matter where you shop.
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