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Credit Card Issuers vs. Networks — What’s the Difference?

3 min read
Brendan Harkness By Brendan Harkness Updated Nov 21, 2019
AT A GLANCE

Credit card networks (Visa, Mastercard, etc.) process transactions between merchants and issuers. Credit card issuers (Chase, Citi, etc.) provide financial backing for credit cards, and often have a hand in developing their rewards and benefits.

Visa, American Express, Discover, Mastercard – What’s the Difference?

There is certainly no shortage of credit card choices available for consumers. In fact, there are so many choices across credit card networks and issuing banks that it can get downright confusing. Filling your wallet with the right credit cards is a process that’s going to be different for each of us. However, understanding the following regarding the credit card environment can help you make the right choices. First, it’s important to understand the difference between credit card networks and credit card issuers.

Credit Card Networks

The purpose of credit card networks is to control where credit cards can be accepted and to facilitate transactions between merchants and credit card issuers.

There are four major credit card networks:

A credit card network sets the interchange or “swipe” fees that merchants are charged to accept a credit card transaction, but credit card networks do not control fees a cardholder pays such as the interest rates, annual fees, late fees, foreign transaction fees and over-limit fees.

Credit Card Issuers

Visa and Mastercard do not actually issue credit cards to consumers. Instead, financial institutions, like banks or credit unions, will 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 is in charge of:

  • Approving or denying credit card applications
  • Setting the terms and most of the benefits on the account
  • Paying for transactions on behalf of the cardholder
  • Collecting payments from the cardholder
  • Providing customer service

Although credit card networks and credit card issuers serve entirely different purposes, 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.

Credit cards from the Visa and Mastercard networks are issued to consumers by different banks, such as Chase or Capital One.

American Express and Discover cards are generally, though not exclusively, issued directly from Amex or Discover without the involvement of a middleman.

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:

Issuer U.S. Purchase Volume (Bil.) (2017) U.S. Market Share (2017)
American Express $686.9 20%
Bank of America $332.9 10%
Barclays N/A N/A
Capital One $288.7 9%
Chase $669.9 20%
Citi $384.6 11%
Discover $128.8 4%
Synchrony N/A N/A
USAA N/A N/A
U.S. Bank $136.1 N/A
Wells Fargo $125.8 4%

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 cards on the Visa network.

When a consumer has credit cards from multiple networks it can usability problems. It’s not a bad idea for consumers to have a credit card from each of the four major credit card networks as long as all of the accounts are managed responsibly.

It is worth noting that having multiple credit card accounts from multiple networks or issuing banks does not make a consumer more vulnerable or more prone to going into credit card debt. For the responsible consumer there is no bigger temptation to overspend on one credit card versus overspending on four or more credit cards.

New to the world of credit cards? Be sure to follow credit building best practices — always make your monthly payments on time, try to keep your balances low relative to your credit limits, etc. — in order to keep your credit scores in peak condition.

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 them, 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 all determined by the bank or credit union that issues the card, as well as any affiliate companies, like hotel chains or retail stores.

Instead, the payment network provides some of the auxiliary benefits that often come with cards, like payment protection and auto rental insurance.

Global Acceptance

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 make a difference, however, as almost every place that takes Mastercard also accepts Visa. With the growing popularity of both of these networks around the world, it will become increasingly rare to find a merchant that only takes one of these.

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
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