What is a Credit Card Issuer? – Simply put,a credit cad issuer is a financial institution that gives the consumer a certain amount of credit that can be validated with an electronic card.The credit amount along with sensitive card holders information is digitally stored and each time a purchase transaction is initiated by the card holder,the available credit is reduced.
This complicated process is facilitated by payment processing networks to ensure smooth functioning of the entire transaction,as well as safe guarding the personal information of the card holder at the same time.
(The two biggest Payment processing networks are Visa and Mastercard)
The credit card issuer is the bank,credit union,retail chain or private financial institution that will give you,the consumer a credit card.
If you have a savings or checking account with your bank and are already an existing customer of that bank,then you can easily apply for a credit card with that bank.
If you do not have any credit history and want a credit card,there are ways to get about doing that too.
Why do credit card issuers give credit cards?
Most banks like Bank of America,Household bank,Citibank issue credit cards to customers so that they can earn money by way of interest and fees.
An easy way to look at this is – A credit card is a loan given to you, and you need to repay this loan with high interest.Besides interest,you might also have to pay fees like annual fees,late fees,signing up fees etc.
The interest charged on most credit cards is sky high – in the range of 3% to 5% per month.
Credit card issuers,Payment networks and Merchants
When you goto say,Walmart and use your credit card to purchase groceries, you are actually using the banks money to buy those groceries.The bank loans you this money,and you repay it every month with interest.If you repay the entire amount you are saved from interest charges,but if you pay only a small part of it and carry forward a balance to the next month,you are liable to pay interest on that balance amount.
The electronic transaction,trasnfer of information, payment gateway, electronic firewall and character coding,and secure encryption is all handled by the payment network like Visa / Mastercard.
The merchant is the last point of contact between you,the credit card holder and the vendor.the vendor who swipes your card is the merchant.
When will a credit card issuer deny you a credit card
Credit cards are small term loans with high interest.Only people with genuine credit worthiness are selected to be issued cards.There are few instances when a card issue will deny you this privilege like:
- If you are less than 18 years of age
- If you do not have any previous credit history and are a first time customer
- If you have bad credit history or are blacklisted by the credit bureaus
- If you have a low credit score and have defaulted on payments in the past
Advantages of accepting a card from an issuer
Like said earlier,owning a credit card is not a right,but a privilege. It makes your life easier to go cashless.
- It is a safer mode of carrying and transferring funds
- You cannot lose money if you get mugged or robbed
- It is seamless and efficient mode of transfer of money
- Gives you freedom to spend
- Allows you to pay just 3% of your total outstanding every month called as the “minimum due”
- Timely payments on your card increases your credit score and helps you build credit
- With the advent of the internet,it is the most commonly used way to purchase products online
- You can co sign with a member of your family who has no credit history,thereby helping them start a building a credit score.