Credit Card Collections
The credit card collections are very important to ensure that the debts of the customers do not make the credit card companies bankrupt. There are three things or considerations of utmost importance for the credit card collections teams.
Delinquency of the cardholder accessed by the credit card collections team
The credit card collections must assess the delinquency of the cardholder. A delinquent cardholder is one who has missed on at least one repayment on their credit card bill. The credit cards have a date on which a cardholder must make payment by or before. Where a cardholder misses the deadline, they are said to be delinquent.
Credit card collections teams collections options
The credit card collections team makes the decision on which collection option they will take to collect on the delinquent cardholder. The collections team makes a decision to either collect the debts in-house or to outsource the debts. Outsourced debts are those that are given to a different debt collection company to collect on behalf of the card company. The debt collection company is paid a commission of the collected debts. The credit card collections team may decide to debt collect using the debt collectors employed by the card company.
The decision to outsource debt collection is usually due to the time it takes to collect the debts and the expertise that is required, which the card company may not be willing to engage. The card companies mainly outsource the debts that are past six months old, where interest can no longer be recognised as profits for the card company.
Account sorting decision by the credit card collections team
The collections team sorts the cards using various criteria depending on the credit card collections team. The accounts may be sorted according to accounts that are ranked as high risk and are likely to end up delinquent. Sorting decisions are not always time based. Where the amounts are large, the period of delinquency becomes irrelevant. The huge debts must be collected first and most effort is concentrated on this option.
Like all credit card collections decisions, the methods and ways of ensuring that cardholders do not eat up all the profits by being delinquent is key. The card companies must engage the right methods and decisions in order to maintain a healthy balance between the credit they give out and the collections they make on the same credit. When credit card collections teams make wrong decisions, card companies make untold losses and are sometimes forced to close down.