Which entity is referred to as the card-issuing bank?

The card-issuing bank is defined as the financial institution that directly interacts with cardholders. This entity is responsible for providing payment cards, such as credit or debit cards, to individuals or businesses and is the one that extends credit or manages the customer's bank account linked to the cards.

This bank holds the relationship with the cardholder, determining credit limits, managing account statements, and supporting customer service inquiries regarding those cards. Therefore, option B accurately describes the role and function of the card-issuing bank within the payment ecosystem, emphasizing its direct connection to the customers who use the cards for transactions.

Other options do not encapsulate the primary role of the card-issuing bank. For example, while any bank that processes card transactions might be involved in the payment process, it does not specifically identify as the issuer of the cards. Similarly, a third-party service provider may manage accounts but does not engage directly with cardholders in the manner required to be classified as a card-issuing bank. Finally, the merchant bank’s role involves accepting payments on behalf of retailers rather than issuing cards to customers. Therefore, understanding the direct relationship between cardholders and the issuing bank clarifies why option B is the correct answer.