What effect does the cardholder's issuing bank have in the credit card transaction process?

The role of the cardholder's issuing bank in a credit card transaction is primarily to manage the cardholder's account, which includes authorizing transactions and collecting funds for those transactions. When a cardholder makes a purchase, the cardholder's bank is responsible for verifying that the cardholder has sufficient credit available to cover the cost of the transaction. Once the purchase is approved, the bank processes the charge by adding that amount to the cardholder's outstanding balance. Additionally, the bank facilitates the transfer of funds to the merchant's bank after processing the transaction, thereby completing the cycle of credit card payments.

In this context, the function of collecting funds from the cardholder is pivotal. It ensures that the bank receives payment for the credit extended to the cardholder when the card is used. Thus, the cardholder's issuing bank plays a crucial role in maintaining the integrity of the transaction and ensuring that the merchant is eventually paid for the product or service rendered.