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Credit Card
How credit cards workInterest chargesBenefitsGrace periodThe merchants sideParties involvedTransaction stepsSecured credit cardsPrepaid credit cardsFeaturesSecurityProblemsProfits and lossesCanadaHistoryCharga PlateCollectible credit cardsControversyHidden costsRedliningCredit card numberingCredit cards in ATMs
How credit cards workInterest chargesBenefitsGrace periodThe merchants sideParties involvedTransaction stepsSecured credit cardsPrepaid credit cardsFeaturesSecurityProblemsProfits and lossesCanadaHistoryCharga PlateCollectible credit cardsControversyHidden costsRedliningCredit card numberingCredit cards in ATMs
Parties involved
* Cardholder: The holder of the card used to make a purchase; the consumer.* Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case.
* Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder
* Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant.
* Independent sales organization: Resellers (to merchants) of the services of the acquiring bank.
* Merchant account: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with.
* Credit Card association: An association of card-issuing banks such as Visa, MasterCard, Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks.
* Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and VisaNet.
* Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of typical affinity partners are sports teams, universities and charities.
The flow of information and money between these parties — always through the card associations — is known as the interchange, and it consists of a few steps.