Credit Card Issuer vs Network

Many people are unaware of what a ‘Credit Card Network’ entails, and even those who are familiar with the term often misunderstand its definition. There’s a widespread belief that a card network is the same as a card issuer, but this is a misconception among many card users. It’s important to realize that a credit card issuer and a card network are separate entities. While both are crucial for the functioning of a credit card, their roles are distinct. To simplify, let’s differentiate between the card issuer and card network on a credit card. The card issuer’s logo, such as ICICI Bank, HDFC Bank, SBI Card, etc., is usually located on one of the top corners of the card. Conversely, the card network’s logo, like Visa, Mastercard, Diners Club, etc., can typically be found at the bottom corner of the card.

Features and Benefits of Credit Card Issuer and Network

Credit Card Issuer:

• Definition: A card issuer is a financial institution, such as a bank or a non-banking financial company, which furnishes credit cards to customers, complete with predetermined credit thresholds.
• Borrowing Source: When individuals apply for a credit card, they are essentially borrowing money from their card issuer.
• Credit Approval Process: The card issuer evaluates the applicant’s credit score to decide whether to approve or reject the credit card application.
• Credit Limit Assignment: Upon approval, the card issuer sends the credit card to the applicant and assigns a specific credit limit, which can vary for different customers.
• Features and Benefits: Most of the features and benefits associated with a credit card, such as rewards and perks, are provided by the card issuer.
• Terms and Conditions: The card issuer determines the fees, charges, and other terms and conditions associated with the credit cards it issues.
• Examples of Card Issuers: Popular card issuers in the country include HDFC Bank, American Express, ICICI Bank, SBI Card, Axis Bank, IDFC First Bank, Punjab National Bank, and others.

Network:

1. Role: Credit card networks act as intermediaries between card issuers and merchants, facilitating the smooth processing of payments.
2. Acceptance Determination: These systems determine the locations where a credit card is accepted, impacting how widely the card can be used.
3. Processing Payments: When a credit card is swiped at a store, the credit card network swiftly processes the payment, ensuring a seamless transaction.
4. Major Networks in India: Visa, MasterCard, RuPay, and Diners Club are key credit card networks in India.
5. Functions: While these networks perform similar functions, differences lie in their names and logos.
6. Merchant Acceptance: Not all merchants accept all networks; some may only accept Visa and MasterCard, while others may exclusively accept RuPay cards.
7. Unique Programs: Main television networks often provide exclusive offerings like lounge access programs. Take, for example, Visa and MasterCard, which offer lounge access programs enabling cardholders to enjoy access to airport lounges both domestically and internationally, including in India.
8. Terms & Conditions: Each network may have its own set of terms, conditions, and advantages for cardholders.

Comparison between Credit Card Issuer and Network

Credit Card Issuer:

1. Determines approval or rejection of credit card applications.
2. Sets credit limits for cardholders.
3. Evaluates the costs and fees linked to credit card usage.
4. Offers benefits and customer care services to cardholders.

Network:

Q1: What distinguishes a credit card issuer from a credit card network?

A1: A credit card issuer, like a bank or credit union, issues the credit card to the cardholder, whereas the credit card network manages the system through which transactions are processed.

Q2: Who establishes the terms and conditions of a credit card – the issuer or the network?

A2: The credit card issuer sets the terms and conditions of the credit card, including interest rates, fees, and rewards programs, while the network manages transaction processing without influencing individual card terms.

Q3: Can I opt for a different credit card network for my bank-issued credit card?

A3: Typically, the issuing bank determines the credit card network, such as Visa or MasterCard, meaning cardholders cannot generally change the network associated with their card.

Q4: What function does a credit card network serve in transactions?

A4: Acting as a payment gateway, the credit card network facilitates transaction authorization, clearing, and settlement among merchants, cardholders, and issuing banks, ensuring smooth and secure payments.

Q5: Is my credit card universally usable regardless of its network?

A5: Credit card acceptance depends on the network and merchant agreements. Cards from major networks like Visa and MasterCard are widely accepted, yet some merchants may have exclusive agreements, limiting usage of cards from other networks.

Q6: How does a credit card issuer generate revenue?

A6: Credit card issuers earn revenue through interest on balances, annual fees, transaction fees, and interchange fees paid to the credit card network for transaction facilitation.

Q7: Can I hold multiple credit cards with different issuers but the same network?

A7: Yes, it’s possible to possess multiple credit cards from different issuers yet sharing the same network. However, each card will have its unique terms and conditions set by the respective issuers.

Q8: Do all credit cards within a network offer identical features and benefits?

A8: No, despite utilizing the same network infrastructure, each credit card’s features and benefits are determined by the issuing bank, resulting in varying terms, rewards, and fees.

Q9: How does the issuer-network relationship impact cardholders?

A9: The issuer-network relationship influences cardholders regarding card acceptance, perks, and benefits, necessitating awareness of specific terms and conditions to make informed credit card choices.

Q10: Can I independently select my credit card issuer and network?

A10: Typically, credit card issuers and networks are interconnected, meaning you cannot choose them independently. When applying for a credit card, the issuer’s chosen network is inherently associated with the card.