Introduction to virtual credit card

A virtual credit card is a credit card that every-time when one wants to make an online purchase on enters the actual credit card information and a new number is generated to facilitate the online purchase. This virtual credit card number generated will be temporary and expires immediately the online purchase is successful.

 Advantages of virtual credit card.

• One of the advantages of the virtual credit card is that the number generated is only valid for the one time online purchase and transaction. Once the online transaction and purchase are successful the it expires.
• Another advantage of virtual credit card is that one can set a limit for the particular online purchase and transaction they want to make. This advantage of the virtual credit card ensures that the merchant does not charge more for the online purchase and transaction. Therefore virtual credit cards help the one take control of their finances by ensuring that they stay within their financial budget.
• Virtual credit card has another advantage in that they are widely recognized and can be used by anyone online to make any online transactions and online purchases. Most merchants accept the virtual credit card giving the online shopper freedom. Therefore virtual credit card allows for online purchase from all over the world.
• Data safety and security is another advantage of virtual credit card in that the actual account number of the credit card is not visible to the merchant or on the online payment system. Therefore this information cannot be used by fraudster to make any other fraudulent online purchases and transactions. This makes online transactions and online purchases using the virtual credit card safe and a great advantage.
• Another advantage of the virtual credit card is that it gives the online purchaser freedom as they are not worries that their actual credit card information would be used fraudulently.
• Another advantage of using virtual credit card is that there is flexibility in the use of this virtual credit card as it can only be used when there is a need to make online purchases. Since the number generated for the virtual credit card is temporary then the online purchaser uses it only when they are ready to make any online purchases.

 Disadvantages of virtual credit card.

•  One of the disadvantages of the virtual credit card is that the transfer of funds from the online purchasers account to the merchant account takes time and at times the goods are delivered before the actual payment to the merchant is made.

• Another disadvantage of the virtual credit card is that even though the virtual credit card is widely accepted, some merchants are still skeptical and have not fully accepted the virtual credit card.

Reasons why people get into credit card debt

credit card debt

Many people at one time or another get into credit card debt. There are many reasons why people get into credit card debt among them:  job redundancy, shopping sprees, illness in the family and unplanned spending due to peer pressure.

11 steps to get out of credit card debt

1. Consolidate thecredit card debt especially if you have more than one credit card. This makes it easier to pay off the debt.
2. Do not carry your card with you if it is to be used as an emergency card.
3. Do not continue to use the credit cards but use cash. If possible, cut up the credit cards to remove temptation. Cash is easier to monitor than when a credit card is used.
4. Pay off all the small credit card debt. This will consolidate more money to be paid off in higher amounts to credit card debts which are more.
5. Get a loan from your bank to pay off your credit card debt. It is cheaper to pay off the loan than credit card interest which is usually very high. Sometimes the credit cards companies assist the cardholder to repay the debt by rescheduling the debt. Rescheduled repayments sometimes attract less interest, but the card account has to be declared delinquent.
6. Avoid all unnecessary fees and charges levied on the credit cards. There may be fees for making late payments or paying less than the minimum required. These should be avoided since these fees and charges carry compounded interest
7. Make a payment plan for all your credit cards. When one card is fully paid, close the account. Do not use the money that was being paid to this card as extra spending funds but add it to pay off the next card.
8. The cardholder can consider getting a credit card that charges less than the card they have. This option may mean moving from one credit card Company to another to get out of credit card debit
9. One should consider getting out of credit card debit by getting a debit card. The debit card may be mapped to only one current account and no access to the savings. This helps the cardholder to save up the money in a separate bank account and this will be paid to the credit cards.
10. Make payments that are more than the minimum requirement from the card company. Avoid making just the minimum payments and reduce the interest charges.
11. Make payments the day after the statement has closed. For example, if the statement closes on the10th monthly, make payments as soon after this date as possible. This reduces the daily interest charged on the amounts that are outstanding in the account.

Though it seems like the credit card debt will never end, the cardholder with a credit card debt must exercise patience and never miss a payment.

Management of Credit Card Risks in Kenya

Credit Card Risks in Kenya

Credit card companies rely very heavily on the credit scoring bureaus and the information that is given on the application forms. Rarely do the card companies engage credit card risks management firms to assess the risks of running the cards business they engage in. The credit card risks are also not usually managed by the financial institutions’ risk management units. The banking industry in Kenya and indeed in the world has not appreciated the nature of credit card risks.Credit card applications are one area where credit card risks are most prevalent.

Prudent management of Credit card risks in Kenya -The Application screening process.

The cardholder is required to complete an application form for which he signs that the information he has availed to the card company is correct. It is not usual to have the cardholder do a face to face interview for a credit card. Where an application is suspect, the application is declined and usually the applicant is not interviewed or arrested. Information of this fraudulent application may not be sent to the credit reference bureau. This means the applicant would just approach another financial institution.

We have many cases where the applications with credit card risks are approved as the applications are not well screened. The staffs that are screening application forms do not understand credit cards risks and so do not know what to look out for. The management of credit card risks requires training, experience and also exposure to real life cases and/or case studies on the same.

When not adequately screened and monitored, many fraudulent applications are successfully processed. This is a major revenue leakage and more so because the credit card may never even be paid for since the applicant is fraudulent.

Credit card risks in Kenya and the role of credit rating bureaus

Financial institutions should ensure to make use of credit rating or scoring bureaus to ensure that they catch some of the fraudulent applications before credit cards risks are experienced by the bank. Prevention is definitely better than cure. The credit reference bureaus have to ensure that they keep updated and accurate information in their data. If the integrity of the bureaus is compromised, then credit card risks management would become harder to frustrate and contain to manageable levels.

It is therefore extremely important for the financial institutions to consider the losses they incur due to weak or nonexistent credit card risks in Kenya management department or unit that is involved in vetting credit card application forms.