How Do Credit Cards Work?

By: Reflexiones Facil24 on 11:33 PM

Credit Card transactions involve a complex network of various entities.

Card Associations

The credit card associations are brands that are well recognized by consumers and merchants and include VISA, MasterCard, Discover, Diners Club and American Express. These associations create and enforce member governing rules, provide authorization and settlement networks, conduct fraud monitoring, and market the association brand. They make their money by charging member financial institutions and credit unions annual membership fees, and they also get paid about a dime in assessment fees for every $100 that they process through their network.

Issuing Financial Institutions

The issuing financial institutions market and provide branded credit and debit cards to consumers. The issuers are well known brands like Chase, Bank of America, and Citigroup, to name a few. The issuers make money from interchange fees when the consumer uses his/her card in a purchase transaction, but most of their money comes from the interest income associated with consumers carrying credit card balances from month to month.

Merchant Card Acquirers

Merchant card acquirers promote and sell card acceptance services to the merchant community. These acquirers charge a discount rate to merchants and billers, and this discount rate is their primary source of income.

Processors

The final link in the chain is the card processor, who provides transaction authorization services, account statement services, and invoicing services. Processors must drive a lot of volume through their network to generate any meaningful revenue.

Interchange

Interchange is the amount of money that is collected by the issuing bank from the acquiring bank for each transaction. These rates vary according to vertical market, and also vary within due to variables like whether the card was physically present during the transaction or not. Merchants will have to pay more for a transaction initiated that was not swiped using a physical terminal.

All of the entities in the credit card transaction process play an important and vital role that contributes to facilitating this convenient and reliable financial network for consumers and merchant businesses.  How do credit cards work and Get Rid Of Your Debt, Clean Up Your Credit, And Make Debt Collectors Go Away? And Make Money Doing It! If you want more info just ingress right here.