How credit card companies work

Miscellaneous and Personal Stuff I Must Share
1

I have worked for a credit card company that rhymes with wisa for over 15 years now. When I tell people where I work, invariably their first question is “Can you get me a card?”. Or, “Can you lower my rate?”. After years of politely laughing at the silly jokes, I have decided to fight some ignorance. So here you go starting with Visa:

Visa is a private company. We own the Visa brand and provide licensing to Banks that want to issue Visa cards…debit or credit. We also provide those same banks a network for authorizations. So that when you swipe your card at a store, that transaction is routed through the Visa network, to the bank that issued your Visa card to you. The transaction is authorized, and routed back through the Visa network to the same store.

We also provide settlement services for member Banks. Since you just walked out of the store with merchandise, your Bank now owes that store money. We act as the transfer point and transfer monies between your Bank and the stores Bank.

We do not set interest amounts, or keep customer information. We are simply a network, and we set the rules and standards that all Banks must follow to issue Visa cards. This ensures that no matter what bank you get a Visa card from, it is treated the same at a store. No matter if it is Citi Bank or Toms Bank.

Visa also provide brand marketing, like “Everywhere you want to be” etc…
Visa makes money on a transaction basis by charging Banks a .001 cent fee for transactions processed thru our network. Sounds small, but in the US, Visa processes some 4-5 thousand transactions per second 24hrs a day. There are also various service and monthly fees.

MasterCard provides the exact same service, in the same structure but on a smaller scale. And they are now a publicly traded company.

American Express is a private company that issues its own card, not through a bank.

Discover is the same as Amex.

there ya go. ignorance fought for the day. Any questions?

2

Can you get me a better rate?

What do you do for them? Phone Jockey^H^H^HH^H^H^^H^H customer service professional? Fraud Division? Support staff? Do you find it interesting or is just just a job with a “big company” that you could do with other companies as well?

3

Hey, thanks for sharing. You might want to ask a Mod to change the title to “Ask the Credit Card company employee” as that goes with the general theme of how this is done 'round these here parts. :wink:

Does Visa also act as the center point for complaints or lost/stolen cards, or things of that nature?

-Tcat

4

Might be worth adding that Amex now has deals with some banks to allow them to issue cards on its network in the same way as Visa/MC work with banks.

If you really wanted to waste a while composing a long post you could explain the antirust difficulties caused by the historical scenairo of being a bank association, and the exciting technicalities of interchange, but apart from that, a worthy contribution. :wink:

5

Here I was all excited at the prospect of trying to figure out which company you work for - (Mmmmm, Bleeza? Sneeza? Crackers and Cheeza? ) and you up and tell us in the very next sentence.

6

And by that you mean their reputation isn’t stainless? :smiley:

7

I manage a technical help desk.

We offer that service to Banks that want to use it. Check the back of your card. If it has a 800 VISA 911 number, then your calling Visa. If not, then your own bank provides that service.

Well the option is there for Amex to work with banks now. They are talking, but as of yet, no bank has really started issuing Amex. And I dont really see that taking off in any case. Visa/MC are accepted at thousands more locations than Amex. The higher interchange Amex charges, with the smaller consumer base, just doesnt make sense to most.

You cracked my encryption! damit!

8

Okay, I have a question.

Not too long ago, when I called to activate a replacement card, the rep asked me (in an insufferably righteous tone) why I had not activated my “fraud insurance.” Essentially, I’d pay $49.99 per year to ensure I wouldn’t be liable for fradulent charges.

As I replied to the rep, the reason I hadn’t bought the service is that I understood that under Federal law, I could only be held liable for $50.00 in fradulent chages, anyway. The way I saw it, I told her, is that I could pay her company fifty dollars a year for protection against something that probably won’t ever happen, or I could pay fifty bucks if it did, and then only if I hadn’t reported my card lost/stolen. I don’t think her script had a ready response for that, because she just said thanks for my time.

What gives? Is this a way of getting the consumers to carry insurance for the credit card companies who are the ones who would end up getting screwed by the theft?

9

I think he is talking about the slew of anti-trust suits filed against Visa/MC. The whole mess started some years ago with a class action suit brough against Visa/MC by the Evil Empire Wal-Mart. The problem started with association rule “Honor all cards”. Which basically means that if a card has a Visa/MC logo on it, and your a store that accepts Visa/MC you have to take the card, no matter what bank, or type (credit/debit/chip etc…) it is.

The rule was in place of course to ensure brand intergrity. So that people from small town banks, get the same treatment as people with cards from big banks. The problem started, like all things, because of money. Visa/MC charged a slightly higher fee for processing some Debit card transactions. This made the merchants (wal-mart etc…) mad. Visa/MC charged more for Debit, which exploded in use in the past 5 years, but didnt give them the choice to accept it. Or gave them the option the process Debit as Credit.

So Wal-Mart sued, and Visa/MC settled the class action for a few billion. We changed the rule, and the fee structure. Oddly enough the merchants complained about the higher fee, but when it was lowered, merchants didnt lower their prices…hmmmm…

And once the door was opened, now everyone wants to sue the big boys. Most of the suits are around fees, fixed pricing, international conversions…etc…

10

Well I dont know the details, but I would guess what your bank was offering wasnt protection for reimbursment, but probably some services to help you get back on your feet quicker. You know, help with ID theft, fixing your credit report, filling out papers, etc…

You are right in that the cardholder is only responsible for the first 50, but that ususaly is if you dont report the card stolen/lost before any charges hit your account. If you report the card before any charges are made, and some are still made, your not responsible for any amount. I would recommend you shop around some. Alot of banks now offer no responsibilty type accounts, which means you pay nothing, no matter what.

11

I think MBNA and CitiBank are both actually issuing Amex. This has been going on for about two years now, according to this:

I agree that Amex is less accepted and less popular than Visa/Mastercard. Do you think these bank issued Amex cards will not be popular because they lack Amex’s main selling point, ie. their reputation of having excellent business services and making a good business card?

12

This is where it gets a bit murky. Those banks are not “issuing” Amex cards, at least not in the sense they issue Visa/MC. Amex is, in essence, co-branding with these banks to issue Amex cards with the bank names on them. In order for Amex to truly move into the credit world they need to increase their cardholder base. This is one way they hope to do that.

Currently Visa holds 52+% of the worlds credit card volume. whats left is divided up between MC/Amex/Discover/Dinners. Until Amex moves up, the smaller retailers are just not willing to pay the higher interchange and association fees that Amex charges. Why should they when Amex just doesnt generate that much business…excluding T&E…which I think Visa caught up to them a few years back. I would need to check those numbers so dont quote me!

13

Is there any appreciable difference between Visa and Mastercard to the cardholder? Do all stores that accept one also accept the other? Are there advantages to one over the other?

And thanks for taking the high road with my dumb antirust/stainless joke. :slight_smile:

14

Not in the US. Internationaly is a different story. Visa spent alot of time/money in the later 80’s early 90’s getting overseas. As a result the Visa network is more stable, and the Visa card is accepted in more places. Here in the states tho, you would be hard pressed to find a place that takes Visa, but not MC…if any.

Not so much the high road…I laughed my butt off. But it was good question, and rather than quote his spelling mistake (since my spelling sucks as well), I just took yours… :slight_smile:

15

Here’s my question.

I don’t believe I have to show my ID to retailers or for service, when I offer my Visa/MC card (either debit or credit) to purchase items or pay for car repairs, as signature comparisons are supposed to be enough. Heck, Visa spent millions of dollars on a whole series of commercials to tell the consumers they don’t have to show ID when they use their Visa debit card.

Yet they ask, and I’m a bit flummoxed, as I usually want the things I’m in the process or purchasing, and I like being able to drive away from the repair shop in my own just-fixed car.

How do you suggest I handle the cashier who is just following policy (which appears to be: check id but don’t compare the signatures), when I refuse to show my ID?

16

Visa doesn’t set all the rules for ID policy. That is up to the individual Banks and the retailers they serve. But understand that in cases of Fraud, if the Merchant does not attempt to verifiy identity, they will have to eat the Fraud loss. In cases of Fraud, by the time fraud is determined Visa has already transfered the money from the cardholder bank, to the merchants bank. There is a large dispute process that governs how cardholder banks, get their money back from the merchants bank. And every little detail counts. the smallest thing can cause the merchant to eat the fraud loss.

17

[hijack]

Does that really bother you? I actually appreciate it. On the back of all my cards, I write in big letters: “SEE I.D.”

[/hijack]

Individual retailers have their own rules for accepting payment. In other words, it may not be a Visa policy, but a *store *poilcy-- just as some stores take checks without asking for ID, but others are more cautious.

If it really bothers you, shop elsewhere. I don’t think that you have *legal *grounds for refusing to show ID. I think the law would side withh retailers who can make their own policies for forms of payment and the ID necessary to use them.

18

I thought Visa/MC also took 4% of the transaction? If I buy a jacket for $100, put it on visa, the store gets $96 eventually from visa. Visa gets $4. Wrong?

19

No good; “Not valid unless signed.” the post office and any other merchant who knows what they’re doing won’t accept the credit cards if they’re not signed.

Plus, I don’t like providing my house numbers (i.e., my Credit Card Billing Address) to random people who already have access to the rest of my card numbers so now they can go order as much stuff online as they like.

Dob, can I have some sort of cite that Visa allows merchants to require ID for transactions as a matter of policy, and not just for suspicious and card-not-signed transactions?

20

Actually I think they are. Those bank deals are straightforward acquisition/issuer setups just like Visa/MC deals. You may be thinking of some of the more weird things like the ExtrAA cobrand with American Airlines or the Accor/Amex “in bed with every company in France” card.
MBNA runs the accounts and servicing, Amex does the aquisition and auths, they split the interchange revenue.

Dob - I think the antitrust issues originally started because both Visa and MC were mutual associations of banks, the same banks sat on the boards of both associations, they both set the same rules and fees for merchants, and they both had cross-tied exclusivity rules - if you were a member of MC you weren’t allowed to be a member of any other association but Visa, and vice-versa. Discover and Amex whined about this a fair bit since it meant none of the banks wanted to do business with them as a result. That was the start of the whole mess, once people started prying into the rules of the associations.

Lissa - Fraud insurance is basically a con. They get you to pay for something which they are legally obliged to give you for free in 95% of cases. Nice little earner…