What Is a Credit Card Issuer?

Credit Card Issuers Explained

A clothing store merchant accepts credit card payment.
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Definition

A credit card issuer is a bank or credit union that offers credit cards and extends credit limits to cardholders who qualify.

Definition and Example of a Credit Card Issuer

A credit card issuer is a lender, often a bank or credit union, that extends credit in the form of credit cards. 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 your credit history. Some may have rewards or other incentives to entice you to sign up for credit cards.

Credit card issuers are different from payment processing networks like Visa and MasterCard. Networks authorize and process transactions, set the terms of transactions, and help facilitate payments among merchants, credit card issuers, and cardholders.

American Express and Discover act as both credit card issuers and the payment processing networks for their credit cards. The top U.S. credit card issuers in 2020 were:

Top Credit Card Issuers in the U.S. in 2020
 Card Issuer Active Accounts (millions)
Citibank 95
Chase 83
Capital One 62
Bank of America 58
Discover Financial
American Express 54
Synchrony Financial 37
Wells Fargo 23
Barclays US 16
U.S. Bank 14

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 private information is transferred in the application process. Credit card issuers must have the infrastructure to handle the number of transactions and keep the information safe from hackers.

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. You may need to contact them if you:

  • Have trouble with your card
  • Suspect fraud on your account
  • Need to ask questions about your account

How Credit Card Issuers Work

Credit card issuers decide who can qualify for their cards. They take into account a number of factors when deciding: the creditworthiness of the cardholder, how the card is used, and more. If you have a higher credit score, you will be able to access cards with lower rates or those offering rewards such as airline miles or cashback.

Note

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

Many credit card issuers have grace periods on purchases, which means that if you pay off your balance every month, you won't be charged any interest. A rewards card actually can be a tool for discounts as long as you don't carry a balance.

Carrying a balance, though, can lead to interest charges that cancel out the value of any rewards you receive. For example, if you carry a $5,000 balance on a card with an annual percentage rate of 20%, your credit card issuer would charge you $83.33 in interest the first month. If you didn't make your minimum payment, the next month's interest charge would be higher, because it would be calculated based on the new, higher balance of $5,083.33.

Even if you made a $100 payment, your new balance would still be $4983.33. The interest charged on that amount would be $83.05, less than $0.30 lower than the previous month.

Credit Card Issuer Fees

Whenever you carry a balance on your credit card, you pay interest to the credit card issuer. But even if you pay off your balance every month, your credit card issuer can still make money by charging you fees. Some common fees are:

  • Annual fees
  • Late payment fees
  • Balance transfer fees
  • Foreign transaction fees

Your credit card agreement will list what fees you have to pay for certain transactions and how much those are. Some of them may be a flat dollar amount. Other fees could be a percentage of the purchase you make.

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.

Key Takeaways

  • A credit card issuer is a lender, often a bank or credit union, that extends credit in the form of credit cards.
  • Credit card issuers are different from payment processing networks like Visa and MasterCard. American Express and Discover act as both credit card issuers and payment processing networks.
  • Credit card issuers make money by charging you interest if you carry a balance, as well as with fees such as annual fees or balance transfer fees.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Statista. "Number of American Express Credit Cards in the United States and Worldwide From 2013 to 2020."

  2. Statista. "Largest Credit Card Companies in the United States in 2019 and 2020, By Number of Active Accounts." Accessed Dec. 10, 2021.

  3. Federal Deposit Insurance Corp. "FDIC Law, Regulations, and Related Acts." Accessed Dec. 10, 2021.

  4. MyFICO. "What's In My FICO Scores?" Accessed Dec. 10, 2021.

  5. Consumer Financial Protection Bureau. "How Does My Credit Card Company Calculate the Amount of Interest I Owe?" Accessed Dec. 10, 2021.

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