If you are in the business of issuing credit cards, you assume an amount of financial risk, in that customers, if not careful, can run up large amounts of credit card balances. Inevitably, there will be instances when some of your customers will default on their credit card obligations. As a lending institution, you will need to have systems in place to collect the debt that is owed to you. If you do not then your business will suffer great financial losses. It is as simple as that.
There will be times when the people you issue credit cards to will not pay back the debt that they owe. At this point, it becomes necessary to engage in credit card debt collection.
Granted, most people tend to be responsible, and they generally do not default on their credit card responsibilities. Often, there are extenuating circumstances, such as the loss of a job, medical expenses, or other unforeseen circumstances that lead to the problem.
In spite of that, the credit card granter must employ some means of debt collection regardless of the individual's circumstances. This is important, because the card issuer needs the revenues to maintain the health of the business, as well as keeping a positive relationship with the customers who do pay their debts.
This latter point needs additional clarification. When a credit card customer fails to pay their debts, this money must be generated from another source. Some institutions may choose to raise the interest rates on their other card holders. While this might be a short term remedy, it can also make your good-paying customers very unhappy. They may choose to go with another credit card issuer, causing a longer term negative effect to your business. This is why it is important to use proper credit card debt collection procedures.
As the name suggests, credit card debt collection makes use of the proper collection of past due debt owed, and in an effective manner that follows the letter of the law. Although debt collection can be difficult, if your company follows a few commonly established tips for success, you can greatly improve on your ability to collect the past due monies owed to you. Here are 3 common tools to increase your success:
1. The first step in proper collections is to send a letter to the past due customer. This letter should clearly explain the situation, as well as state the exact amount that is overdue. It should request prompt full payment, while also informing the customer that they may present any information that disputes the accuracy of the statements contained in the letter. Generally, these demand letters will provide a 30-day time period for a response, as the law requires. Also, this is usually an adequate period of time for such a response.
2. If payment has not been offered after this period, you need to contact the customer by telephone within the 31-60 day time window. This call needs to ask for clarification why the debt hasn't been paid. Then focus on, and offer a repayment plan. If success is still not effected during this period, the next 61-90 days should focus on sterner phone calls and letters letting the debtor know of the potential damage to their credit rating in the event of a default.
3. If this doesn't satisfy the problem, the next important step is hiring a third party credit card debt collection agency. These agencies are well experienced at dealing with delinquent credit card accounts and can take these responsibilities off of your business' hands. This allows you to focus your attention on your core business activities. Credit card debt collection is not easy. Some delinquent customers cannot pay for reasons already discussed; others simply will not. However, if you take the proper action to handle the problem, you will find these problems better resolved in a more efficient manner.
It's most important to note that time is crucial here. The sooner you can identify those difficult, problem accounts, and outsource them at a reduced cost and savings of time to those that are better experienced to handle them, the more money you will recover sooner, and the more time and money you will save. The longer a delinquent account goes, the chances of recovering any money is greatly reduced.
There will be times when the people you issue credit cards to will not pay back the debt that they owe. At this point, it becomes necessary to engage in credit card debt collection.
Granted, most people tend to be responsible, and they generally do not default on their credit card responsibilities. Often, there are extenuating circumstances, such as the loss of a job, medical expenses, or other unforeseen circumstances that lead to the problem.
In spite of that, the credit card granter must employ some means of debt collection regardless of the individual's circumstances. This is important, because the card issuer needs the revenues to maintain the health of the business, as well as keeping a positive relationship with the customers who do pay their debts.
This latter point needs additional clarification. When a credit card customer fails to pay their debts, this money must be generated from another source. Some institutions may choose to raise the interest rates on their other card holders. While this might be a short term remedy, it can also make your good-paying customers very unhappy. They may choose to go with another credit card issuer, causing a longer term negative effect to your business. This is why it is important to use proper credit card debt collection procedures.
As the name suggests, credit card debt collection makes use of the proper collection of past due debt owed, and in an effective manner that follows the letter of the law. Although debt collection can be difficult, if your company follows a few commonly established tips for success, you can greatly improve on your ability to collect the past due monies owed to you. Here are 3 common tools to increase your success:
1. The first step in proper collections is to send a letter to the past due customer. This letter should clearly explain the situation, as well as state the exact amount that is overdue. It should request prompt full payment, while also informing the customer that they may present any information that disputes the accuracy of the statements contained in the letter. Generally, these demand letters will provide a 30-day time period for a response, as the law requires. Also, this is usually an adequate period of time for such a response.
2. If payment has not been offered after this period, you need to contact the customer by telephone within the 31-60 day time window. This call needs to ask for clarification why the debt hasn't been paid. Then focus on, and offer a repayment plan. If success is still not effected during this period, the next 61-90 days should focus on sterner phone calls and letters letting the debtor know of the potential damage to their credit rating in the event of a default.
3. If this doesn't satisfy the problem, the next important step is hiring a third party credit card debt collection agency. These agencies are well experienced at dealing with delinquent credit card accounts and can take these responsibilities off of your business' hands. This allows you to focus your attention on your core business activities. Credit card debt collection is not easy. Some delinquent customers cannot pay for reasons already discussed; others simply will not. However, if you take the proper action to handle the problem, you will find these problems better resolved in a more efficient manner.
It's most important to note that time is crucial here. The sooner you can identify those difficult, problem accounts, and outsource them at a reduced cost and savings of time to those that are better experienced to handle them, the more money you will recover sooner, and the more time and money you will save. The longer a delinquent account goes, the chances of recovering any money is greatly reduced.
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