Credit Card Associations

A credit card association is an entity that oversees and facilitates credit card activities.
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What Are Credit Card Associations?

A credit card association is an entity that oversees and facilitates credit card activities.

Credit Card Associations Explained

In the U.S., the largest, most well-known card associations are Visa, Mastercard, Discover, and American Express. These companies are also called card brand associations or card brands.

The card associations work with other players in the credit card industry to enable transaction processing. They collaborate with issuers, acquirers, merchant account providers, and more.

Visa is the largest card association in the U.S. According to Nilson Report, in 2020, Americans spent $7.974 trillion using credit cards. Visa accounted for 54% of that volume, or $4.2 trillion.

Mastercard made up 22%, followed by American Express and Discover at 9% and 2%, respectively.

Aside from their activities in the U.S., the four major card brands work with cardholders and merchants all over the world.

Other worldwide associations include China UnionPay in China, RuPay in India, Troy in Turkey, and JCB in Japan.

Banks and other financial institutions issue Mastercard and Visa credit cards to cardholders. Historically, Discover and American Express have issued cards directly. Today, they also work with some banks to provide cards.

The associations don’t just work with credit cards. They also facilitate debit, prepaid, and gift card transactions.

If you’re a business owner and you take credit cards, you pay interchange fees for each transaction. The card associations are responsible for setting interchange rates. They regularly review and update these rates and communicate changes to processors, merchants, and others.

Most cardholder disputes are resolved between the cardholder’s issuing bank, the merchant, and their processor. Some disputes escalate to the arbitration stage. In these cases, the card association steps in to issue a ruling.

These are just some of the specific activities the card associations handle.

Credit Card Associations Examples

To understand the role of credit card associations, let’s look at a typical credit card transaction.

Lana has a Visa credit card, which her bank issued to her. Card associations, including Visa, work with issuers to permit them to use each association’s branding. Lana’s card has the Visa logo on it.

Today, Lana is using her card to buy $50 of groceries at Jason’s Market. When she’s ready to check out, she inserts her card into the credit card terminal. The terminal requests an authorization using the Visa authorization network and receives an approval. The cashier gives Lana her receipt, and she takes her groceries.

At the end of the day, the credit card terminal will automatically settle. Settlement is the process that ensures Jason will receive payment for his customer’s transactions.

Jason will pay a processing fee for Lana’s $50 transaction. This fee is called an interchange fee and is set by Visa. Under Visa’s interchange program, supermarket transactions have their own specific interchange categories.

For this particular transaction, Jason will pay 1.40% of the transaction amount plus $0.05. This amount is based on the type of transaction, Jason’s merchant category, and the type of Visa card Lana has.

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