What you need to know about credit card companies

Young family sitting in bed, gathered around a laptop to learn what you need to know about credit card companiesImage: Young family sitting in bed, gathered around a laptop to learn what you need to know about credit card companies

In a Nutshell

Learn about the big players in the credit card industry and how you can choose the right credit card issuer.
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Chances are, you’ve got at least one credit card tucked into your wallet (or you’re thinking about getting one)

But how much do you really know about the companies behind the plastic in your pocket? And does it really matter to consumers like you?

The answer to that is yes: It’s wise to educate yourself about the industry to help you navigate the array of credit cards out there and make smarter financial decisions, says Matt Freeman, head of credit card products at Navy Federal Credit Union.

“Finances are an important part of life, and the more you know about the products you use, the better off you’ll be in the future,” Freeman says.

Before you dig too deeply into the credit card industry, you should understand just how much financial terrain it encompasses in U.S. households.

In January 2017, revolving consumer debt in the U.S. — mostly credit card balances — hovered just under $1 trillion.

To put it into perspective, that’s one-fourth of the amount of the federal government’s projected $4 trillion budget for 2017.

The difference between credit card networks and issuers

To understand the industry, you’ve got to understand the main players: the credit card networks and credit card issuers.

Credit card networks authorize and process financial transactions. We bet you’re quite familiar with their names: American Express, Discover, MasterCard and Visa.

As explained by financial services company Capital One, a payment network like Visa “connects the dots for banks that issue cards and the millions of businesses that accept cards.”

Credit card issuers approve your credit card application, set your credit limit, take your monthly payments, provide customer service and offer rewards, according to Freeman. Some well-known names among credit card issuers in the U.S. include Chase Bank, Citibank and Bank of America.

Typically, a logo for a network (like Visa) and a logo for an issuer (like Chase) appear on a credit card.

In some cases, companies can be both credit card issuers AND credit card networks (for example, American Express and Discover).

Big-league players in the credit card industry

Networks and issuers are just the beginning. Now let’s dig into the major-league players in each of these two industry sectors.

According to The Nilson Report, which provides news and data about the payment industry, Visa was the U.S. leader of networks for “general purpose” credit cards in 2016. Visa controlled nearly half of the U.S. market.

A “general purpose” credit card is one that can be used for purchases at a wide variety of stores and businesses.

MasterCard followed with 32.3% of the market share, American Express had 11.8% and Discover had nearly 7.2%.

Among U.S. issuers of “general purpose” credit cards, Chase was the most widely used. Chase had a 16.5% share of the U.S. market in 2016, according to The Nilson Report.

Behind Chase were Bank of America with 11.8%, Citi with 11%, American Express with 10.7% and Capital One with 10.5% of the U.S. market share.

Discover ranked first for overall satisfaction in J.D. Power’s 2016 U.S. Credit Card Satisfaction Study, earning high marks in categories such as rewards and customer interaction. American Express ranked second overall, followed by Capital One, Barclays and Chase.

J.D. Power is a marketing information company that conducts independent consumer surveys.

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As for American Express, its most popular cards among Credit Karma users include the Amex EveryDay® Credit Card, Blue Cash Everyday® Card from American Express and American Express® Gold Card .

Capital One’s most popular credit cards with Credit Karma users include Capital One QuicksilverOne Cash Rewards Credit Card and Capital One® VentureOne® Rewards Credit Card .

Using your knowledge of credit card companies

So, now you’re armed with knowledge about the credit card industry. What should you do with it?

Freeman says knowing the industry players can play a role in choosing a credit card issuer. For instance, maybe one credit card issuer you’re considering is hailed for its superb customer service, while another receives mediocre reviews for its service.

But if you’re not aware of card issuers’ strengths and weaknesses, you may not realize which ones excel at customer service and which ones fall short.

If you’re looking for insights into which credit card issuers are rated well (or poorly), check out J.D. Power’s annual card satisfaction survey.

The 2016 study, whose rankings of issuers relied on input from more than 20,000 credit card customers, takes six factors into account, such as customer interaction and problem resolution.

J.D. Power and other credit card experts offer some tips on how to do your homework on credit card issuers.

  • Read blogs and websites that “objectively evaluate” credit card companies and feature feedback from customers.
  • To test an issuer’s customer service before submitting an application, call its customer service phone number “to see how user-friendly and helpful the service is.”
  • Get up to speed on an issuer’s different rewards program options. According to the J.D. Power study, rewards programs are the primary reason that customers choose a credit card. “It is important to select the option that best fits your spending lifestyle,” Freeman says. “For example, if you eat out a lot, you may want to consider a card that offers extra points at restaurants.”

About the author: John Egan is a blogger, content marketer and freelance writer in Austin, Texas. He is former editor in chief at Austin-based startup LawnStarter, and he previously worked at the Austin Business Journal, Bankrate and S… Read more.