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What you will learn

  • What issuing banks are
  • What acquiring banks are
  • What merchant accounts are
  • What underwriting is
  • Why a merchant’s credit rating matters for accepting credit cards
  • What card associations are
  • What processors are
  • What ISOs are

What you should read first

Full article

This is part 1 of 6 of the credit card basics article. Here are links to each part:


We are now going to build on the information from the previous 3 sections to begin explaining in more detail the roles and entities behind the scene during a credit card transaction.


Each member bank of a card association communicates transaction data for every purchase using the card network that is maintained by their card association. Member banks communicate with the card network using “processors”, which can be outsourced companies known as “third-party processors” or in-house departments. Processors specialize in processing functions including transmitting transaction data on the card networks for member banks and performing back-office tasks like managing records of a bank’s relationships. Third-party processors can perform processing functions on behalf of multiple banks. Both acquiring banks and issuing banks use the services of processors but these services are different for acquiring and issuing.

Processors (preliminary definition)
Processors are entities that specialize in transmitting data to card networks on behalf of banks. Processors also perform back-office tasks for banks.
Third-party processors
Third-party processors are entities that are not banks but that perform processing functions for banks.

What you should read next