Consumers these days certainly have no shortage of credit card options available to them. In fact, there are so many choices across credit card networks and issuing banks that it can get downright confusing.
But how you fill your wallet with the right credit cards will be a different process for you than it will be for everyone else. So it’s important to understand a little more about how the credit card environment works so you can make better choices.
First, it’s important to understand the difference between credit card networks and credit card issuers.
What’s a Credit Card Network?
Credit card networks work behind the scenes to make credit card transactions possible. The purpose of credit card networks is to control where credit cards are accepted and to facilitate transactions between merchants and credit card issuers.
Imagine you want to use a credit card to pay for groceries. In this example, the credit card network provides the infrastructure that helps the grocery store accept your electronic payment and collect the funds from your card issuer (who you agree to repay later).
There are four major credit card networks:
- American Express
A credit card network also sets the interchange fees (sometimes known as “swipe” fees or processing fees) that merchants must pay to accept a credit card transaction. Going back to the grocery store example, the merchant pays an interchange fee to a credit card network each time a customer uses a credit card to make a purchase.
Credit card networks, however, do not control the fees that you pay as a cardholder. Fees like interest rates, annual fees, late fees, foreign transaction fees and over-limit fees are outside of the credit card network’s domain.
Other credit card networks
If you live and spend most of your money in the United States, you’ll rarely have to deal with credit card networks beyond the big four – Amex, Discover, Mastercard, and Visa. But that’s not to say other card networks don’t exist.
- Accel: A U.S. interbank debit payment network that encompasses more than 400,000 ATMs
- BC Card: South Korea’s largest payment processing company
- Diners Club International: Discover-owned global credit card company known for pioneering the modern credit card
- Interac: An interbank network that serves as Canada’s primary debit payment processor
- Visa Interlink: Visa’s electronic funds transfer division; notable for using a PIN for authentication, and for allowing customers to get cash back through merchants
- JCB: One of Japan’s major payment networks and credit card issuers; issues cards in more than 20 countries, and is accepted in the U.S. via partnership with Discover
- PULSE: A prominent U.S. interbank debit network; a Discover subsidiary
- STAR: Another long-lived U.S. interbank debit network
- Troy: A Turkey-based card issuer and payment processing network; like JCB, Troy cards are accepted in the U.S. via Discover
- UnionPay: China-based card issuer and payment network that links every ATM throughout the country; the world’s largest card payment company based on total transaction value
- Verve: A Nigerian card issuer and network; accepted globally, including in the U.S., via Discover
- Visa ReadyLink: A U.S. ATM network that lets consumers load Visa Reloadable Prepaid Cards at cash-accepting ATMs
What’s a Credit Card Issuer?
Visa and Mastercard do not actually issue credit cards to consumers. Instead, financial institutions like banks or credit unions work with credit card networks to issue cards. The “issuer” is the bank or credit union that backs the card financially. You may also hear the issuer referred to as the “issuing bank” or even just the “credit card company.”
The issuing bank of a credit card:
- Approves or denies credit card applications
- Sets the credit limits, APRs, terms, and most of the benefits on the account
- Pays for transactions on behalf of the cardholder
- Collects payments from the cardholder
- Provides customer service
As you can see, credit card networks and credit card issuers serve entirely different purposes. Yet there is no rule that prevents a company from both processing and issuing credit cards.
American Express and Discover are both credit card networks and credit card issuers. They generally (though not exclusively) issue cards directly, without the involvement of a middleman. Credit cards from the Visa and Mastercard networks are issued to consumers by different banks, such as Chase or Capital One.
There are too many U.S. credit card issuers to list in full, but here are several of the most prominent, plus purchase volume data provided by The Nilson Report:
|U.S. Purchase Volume (Bil.) (2018)
|U.S. Market Share (2019)
|Bank of America
Credit Card Choices
Though all four major credit card networks are largely accepted by most retailers, a consumer will occasionally come across a retailer or merchant that does not accept specific cards. For example, Costco only accepts credit cards on the Visa network. From time to time you may also come across small, local businesses that don’t accept Discover or American Express.
When a consumer has credit cards from multiple networks, it can solve usability problems. For example, it probably isn’t a big deal that Costco won’t accept your Mastercard if you have a Visa card in your wallet you can use instead. This added payment flexibility is one reason why it’s not a bad idea to carry a credit card from each of the four major credit card networks, as long as you can manage all of your credit cards responsibly.
It’s worth noting that having multiple credit card accounts from multiple networks or issuing banks does not automatically make you more vulnerable to credit card debt problems either. For the responsible consumer, there’s no bigger temptation to overspend on one credit card versus four or more credit cards.
Visa vs. Mastercard
Visa and Mastercard are the world’s most popular credit card payment processors, beating out their closest competitors, American Express and Discover. Most people won’t find significant differences between these two options, but for some lifestyles the choice between Visa and Mastercard might make or break a vacation.
Payment processing networks don’t have anything to do with the interest rates or rewards of a particular card, like points and cash back. These are determined by the bank or credit union that issues the card, and any co-brand partners, like airlines, hotel chains, or retail stores. (The Southwest Rapid Rewards® Priority Credit Card, for example, is a co-branded Visa offered by Southwest Airlines and Chase. Southwest Airlines and Chase set the card terms and rewards program together.)
Yet the payment network does provide some of the auxiliary perks that often come with cards. These benefits may include features like payment protection and auto rental insurance.
Visa and Mastercard are almost completely comparable here. Mastercard actually states that they are accepted in more countries and territories – over 210, compared to the over 170 countries that take Visa. This might be a difference that doesn’t really matter, however, as almost every place that takes Mastercard also accepts Visa.
With the growing popularity of both Visa and Mastercard around the world, it will become increasingly rare to find a merchant that only accepts credit card payments from one of these networks.
Payment network member types
Visa and Mastercard each have several general membership types, or service levels.
Visa service levels
- Visa Traditional/Platinum
- Visa Signature
- Visa Infinite
- Visa Business
- Visa Professional
Mastercard service levels
- Platinum Mastercard
- World Mastercard
- World Elite Mastercard
- Business Platinum Mastercard
- Professional Mastercard
Your membership type may impact some of the benefits you can enjoy while using your credit card. For example, all service levels provide zero liability for fraudulent credit card transactions (when you report problems promptly). Meanwhile, trip cancellation insurance and extended warranties may only be available with certain membership tiers.
How Do You Choose the Perfect Credit Card Network and Issuer?
Choosing a credit card is always a personal decision. First, check your credit and see which types of accounts you’re likely to qualify for before you apply. If you have fair credit, for example, it’s probably not wise to fill out applications for premium rewards cards that require excellent credit.
From there, you can focus on which cards offer the best benefits based on how you spend your money. Perhaps you spend a lot each month on dining. If so, a credit card with higher rewards for dining might be a good fit for your lifestyle.
It can also be smart to carry cards from multiple credit card networks and multiple issuing banks. A diverse set of credit cards gives you purchasing flexibility and may benefit you in other ways. For example, if you have a problem with a particular credit card issuer cutting your credit limits or closing your accounts, having alternative credit cards with other issuing banks may be helpful.
Finally, carrying multiple credit cards (from any credit card network or issuer) could potentially help you to maintain a lower credit utilization rate. Credit utilization, or the percentage of your credit card limits in use, is a big factor in your credit scores. Having more available credit (aka a lower credit utilization rate) can benefit you. The key, whether you have one credit card or 20, is to never charge more than you can afford to pay off in a given month.
The Short Version
- Credit card networks process transactions between merchants and issuers. Credit card issuers provide financial backing for credit cards and may help develop their benefits
- A credit card network also sets the interchange fees (sometimes known as “swipe” fees or processing fees) that merchants must pay to accept a credit card transaction
- There is no rule that prevents a company from both processing and issuing credit cards