The Participants in a Credit Card Transaction

The Cardholder

• The individual initiates a transactionby swipinga credit card issued in their name. The buyer receives merchandise from the merchant, which is paid for by the issuing bank. The cardholder has an understandingwith the bank that they will repay the issuer for the transactionlater when they pay their monthly credit card bill.

The Merchant

• The store or eCommerce shop owner with whom the cardholder has initiated the purchase. The merchant generally accepts credit cards to facilitate payments for transactions. They may also accept other methods of payment includingcash, debit, and contactless technologies.

The AcquiringBank

• The merchant’s bank, which sends transactionand authorizationdetailsahead to the card network for approval. The acquirer then plays a role in relayingthe issuing bank’s response to the merchant. Sometimes, these actions will be performed inhouse, or they may be done with a third-party payment processor or merchant services provider.

The Processor

• For many merchants, their acquirer also serves as their payment processor. In other cases, though, these may be two separate entities. This processor serves to facilitate communications between the acquiring bank and the merchant. These third-party payment facilitators will assume the responsibility of sending and receiving transaction details and authorization, which it will then provide to the merchant or bank, respectively.

The Card Network

• The credit card associations operate branded credit card networks that facilitate global transactions for a given credit card. They also set the rules and guidelines all banks and merchants must follow to use said platforms and govern interchange fees (more on this below). The most widely-used card networks in the US are Visa, Mastercard, American Express, and Discover. The card network will accept authorization requests from the merchant’s acquiring bank, then forward that information to the cardholder’s issuing bank for approval.

The Issuing Bank

• The cardholder’s bank or card-issuing payment account facilitator. The issuing bank will receive payment authorization requests through the acquiring bank, card network, or via the third-party processor, then relays an approval or decline response along the same channels to the acquiring bank.