What is a cardholder bank?

A cardholder bank is defined as the bank that issues a payment card to an individual. This institution plays a pivotal role in the payments ecosystem since it is responsible for underwriting the credit or debit account tied to the card. The cardholder bank evaluates the creditworthiness of applicants, sets the terms associated with card usage (such as interest rates, fees, and credit limits), and manages the overall account lifecycle.

When a consumer uses their payment card for transactions, the cardholder bank authenticates the transaction and ensures that sufficient funds or credit is available. This connection illustrates the cardholder bank's direct involvement in the authorization and settlement processes, and it highlights the relationship between the individual and the bank, which extends beyond mere transaction processing.

Understanding the role of the cardholder bank is crucial for recognizing how payment networks operate and how consumers engage with financial institutions through their payment cards.