What Is a Credit Card Issuer?

A credit card issuer is a bank or credit union that offers credit cards and extends credit limits to cardholders who qualify. 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 through the close of 2019, measured by market share were:1

  • Chase, 20%
  • American Express, 20%
  • Citi, 11%
  • Bank of America, 10%
  • Capital One, 9%
  • U.S. Bank, 4%
  • Discover, 4%

What Is a Credit Card Issuer?

A credit card issuer is 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.

Don’t confuse credit card issuers with payment processing networks like Visa and MasterCard.

Networks authorize and process transactions, set the terms of transactions, and help facilitate payments between merchants, credit card issuers, and cardholders. American Express and Discover act as both credit card issuers and the payment processing network for their credit cards.

Credit card issuers have to follow government regulations to issue credit cards. They must also work with payment processing networks that 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 number of transactions and keep the information safe from hackers.2

The name of the bank or credit union that issues a credit card often is on the front of the card, along with the logo for the affiliated network, such as Visa or Mastercard. If the issuer is not on the front, it may be 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.

How Credit Card Issuers Work

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 may be other fees your credit card issuer 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.

How Much Do Credit Card Issuers Charge?

How much it costs to use a credit card can vary greatly depending on the creditworthiness of the cardholder, how the card is used, and more. Those with higher credit scores typically have access to cards with lower rates and rewards such as airline miles or cash back.

Focus on improving your credit score to gain access to cards with the best rates and the most generous perks. This means keeping balances low on the cards you already have, paying all debts on time, having a healthy mix of credit, and more.3

Many credit card issuers grace periods on purchases. So, if you pay off your balance every month you won’t be charged any interest.4 This means a rewards card actually can be a tool for discounts as long as the cardholder does not carry a balance. However, carrying a balance can lead to interest charges that surpass the value of any rewards received. For example, a cardholder carrying a $5,000 balance on a card with an annual percentage rate of 20% would be charged $83.33 in interest the first month. Additionally, the next month’s interest charge would be higher because it would be calculated based on the new, higher balance of $5,083.33.

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