Credit Card Networks: How Do They Work In Businesses

Credit cards are the most popular payment methods in the US with the total transaction value predicted to $3.843 trillion in 2025. As a small business owner, you are always going to have to deal with credit cards and the major credit card networks that power them. This is despite the fact that  a lot of small business owners may not know what credit card networks are and how they work.

Accepting lots of payment methods is just good business and understanding how credit card networks work can give you the best insight into maximizing their potential and minimizing risks.

but knowing how credit card networks work can give business owners insight into how to maximize their usage and minimize risks. Here's what businesses should know. In this article, we're giving you the lowdown on all things credit card networks, including:

• What credit card networks are
• The difference between credit card issuers and credit card networks
• Types of credit card networks out there
• How do credit card networks work?
• Processing fees for major credit card networks

Let's get started!

What are credit card networks?

Credit card networks help banks and businesses communicate with each other to process credit card transactions. These networks and the banks approve and handle the transactions. On top of this, they decide the terms for each transaction and move money between customers, businesses, and banks. Major credit card networks are Visa, Mastercard, American Express, and Discover, but there are others too.

What is the difference between credit card issuers and networks?

Now onto our next section, the difference between credit card issuers and credit card networks. A credit card issuer (also known as an issuing bank) is a financial institution that provides people with credit cards. For instance, if you've got a credit card with your main banking institution with the bank logo and the Amex logo on it, the bank is the credit card issuer and Amex is the credit card network.

Now, when you use a credit card to purchase something, the transaction request then goes on to the credit card issuer, who then decides whether they're going to authorise it or not. The issuer is the bank that gives the cardholder credit. The cardholder then pays the bank back for any purchases made with the credit card.

Credit card networks can also act as issuers, giving credit directly to cardholders without needing a bank or another financial institution to do it.

Types of credit card networks 

Now that you know what a credit card network is, and how it's different to a credit card issuer, let's get onto the different types of credit card networks out there. These include:

Open card network 

Open credit card networks let other financial institutions issue their credit cards to customers. The two most popular open credit card networks are Mastercard and Visa.

Closed card network 

On the other hand, a closed credit card network is a credit card company that exclusively issues credit cards. The credit card network also acts as the acquirer and disburses your customer's funds directly to your company's banks, excluding the transaction fees. Some popular closed networks are American Express and Discover.

How do credit card networks work? 

Credit card networks connect the card issuer and the business for credit card purchases. Here's how they work:

The customer’s transaction starts at the payment terminal 

The customer uses their credit card at your business's payment terminal by swiping, inserting, tapping, or entering the card number into your card machine.

The payment processor connects with the credit card network 

Once your customer's used their credit card, your credit card machine or terminal sends the card info to the payment processor, which then contacts the credit card network for approval.

• If the network is the card issuer: The network decides if the transaction is approved or not.
• If there's a separate card issuer: The network checks with the issuing bank for approval.

The credit card network contacts the credit card issuer for transaction approval

The credit card network quickly tells the business if the transaction is approved or denied, usually this decision is made within seconds.

Processing fees of major credit card companies 

Credit card networks charge different fees for each transaction, which is a major factor for businesses when choosing which networks to accept.

Types of credit card fees - opportunity to link back to how to accept credit card payments piece

When a business accepts credit card payments, they'll have to pay two main types of fees for every credit card transaction: interchange fees and assessment fees.

• Interchange fee: The acquiring bank charges interchange fees. For example, if Wells Fargo issued a customer's Mastercard, the business pays an interchange fee to Wells Fargo whenever that card is used.
• Assessment fee: The credit card network charges the assessment fee. So, for the same Wells Fargo-issued Mastercard, the assessment fee goes to Mastercard on every purchase.

How Epos Now payment services can help with credit card networks in your business

Epos Now Payments makes payment processing a breeze with one fixed rate and no hidden fees. You can accept payments anytime and anywhere, seamlessly integrating with your retail or hospitality POS system. Whether your customers prefer chip and pin, contactless, or remote payments, we've got you covered, ensuring fast and secure transactions every time.

Our service gives you detailed payment reports, helping you track transactions, manage cash flow, and make smart business decisions. Plus, with our transparent pricing, there are no surprises – just one fixed rate and no long-term contracts. Getting started is easy, and our 24/7 support team is always here to help. All our transactions are PCI compliant, keeping your business and customers safe and sound.