National Issuers

What Are National Issuers?

The term "national issuer" refers to financial institutions that offer credit cards on a national scale, such as American Express (AXP), Citigroup (C), and Discover Financial Services (DFS). Though national issuers typically offer a smaller variety of credit card programs, their loyalty programs tend to be well developed.

On the other hand, smaller issuers such as regional banks usually offer a wider variety of cards but with fewer membership incentives.

Understanding National Issuers

National issuers are generally household names with established brand equity. The annual percentage rates (APRs) that national issuers offer tend to be fairly standardized. For this reason, customers who shop around may be able to find better deals among smaller regional issuers.

Where the national issuers enjoy an advantage is in their cardholder reward programs. Because these programs rely on partnerships with large participating businesses, national issuers can leverage their scale and brand awareness to offer attractive benefits their smaller rivals can rarely match. Likewise, competition among national issuers tends to focus on loyalty programs, rather than financial terms such as minimum monthly payments or APRs.

Another important difference between national and regional issuers relates to cross-collateralization. It is common for regional issuers to require the collateral associated with a customer's other loans to be used to secure their credit card debt as well.

For example, if a customer has a car loan and credit card with the same regional issuer, the issuer might require the card to serve as collateral for both the auto loan and credit card. If the cardholder defaults on either, their car could be repossessed to cover the outstanding balance. National issuers, on the other hand, do not tend to require cross-collateralization of credit lines.

Example of a National Issuer

Emma is researching potential credit card providers. She notices many of the most popular credit card issuers market their products nationwide, whereas regional banks and credit unions market their cards in their own backyards.

In deciding what kind of credit card to choose, Emma's priority is to obtain the lowest possible APR while also avoiding account fees and other charges when possible. She is less interested in perks such as cash-back programs and membership rewards.

Because the national issuers tend to compete on the basis of membership rewards as opposed to attractive APRs and other terms, Emma opts for a smaller regional issuer offering the lowest available interest rate and fees.