When you are looking to get a new credit card you typically focus on things like the welcome bonus, perks, annual fees and more. It’s very rare that you consider the credit card network, or who is providing the credit card. While it used to be that you signed up for a new credit card through your bank, or stayed loyal to a particular brand, it’s not quite as black and white anymore. It may not seem relevant to pay attention to these things, but they are, because it can affect where your card is accepted. Here’s everything you need to know about credit card networks and credit card providers.
What is a credit card network?
Most of us know that there are three major credit card networks in Canada: Visa, Mastercard and American Express. Visa has the largest market share for purchase transactions, sitting close to 30%, with Mastercard sitting just under 21%. American Express has just 1.5% of the market share. The remaining transactions were made using Interac debit cards. Not that you know the networks, it’s important to know what the networks are exactly.
The best way to picture credit card networks is to think of them as the infrastructure that work behind the scenes to make it possible for credit cards to work. They work closely with credit card providers to allow consumers to make purchases with credit cards. They handle the authorization and processing of credit card transactions, transfer payments between shoppers, merchants and the credit card providers, and set the terms of the credit card transactions.
For their services, credit card networks change merchants a transaction fee, known as the interchange fee, and it typically costs merchants between 1.25% to 2.40%. This fee can vary depending on the credit card network, cost of sale, retailer and type of transaction. It’s this fee that stops some businesses from accepting credit cards from every network.
What is a credit card provider?
A credit card provider is the company that provides the credit card to you. They are banks and credit unions, and they are the ones that review and approve applications. They’re also the ones that set the welcome bonus, annual fees and benefits. Whenever you need customer support, including fraud protection, it will come from the credit card provider.
Since Visa and Mastercard don’t provide credit cards directly to consumers, they partner with banks and credit unions to issue them. American Express on the other hand does do business directly with consumers, but they also partner with banks. This makes them both a network and provider. Some of the most common credit card providers in Canada include: Royal Bank, Bank of Montreal, Canadian Imperial Bank of Commerce, The Bank of Nova Scotia and Toronto-Dominion Bank. Some business such as Canadian Tire, Costco, Rogers and PC also have their own financial companies that provide credit cards. Prepaid credit cards are also available, and are provided through Canadian Fintech companies such as KOHO and People’s Trust Company.