If you’re in the business of issuing credit cards, you assume a certain amount of financial risk. Some customers, if not mindful, can run up large amounts of credit card debt. It is to be expected that some of these same customers will default on their credit card obligations. As a lending institution, you should have systems in place to address and collect this debt owed to you. Failing to do so, your business can 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 requires further clarification. When a credit card customer doesn’t pay their debts, this money must be generated from another source. In some cases, it can lead to the institution raising the interest rates on the other card holders. While this can reap short term results to the problem, it can also lead to making your good customers unhappy. They could end up going with another credit card issuer. This will have a longer term negative effect on your business. This is why it is critical to use proper credit card debt collection practices.
As the name suggests, credit card debt collection involves the proper collection of past due monies owed in an effective manner that follows the letter of the law. While debt collection can be difficult, if your institution follows a few commonly established tools for success, you can greatly improve your ability to collect the money owed to you. Here are 3 common tips to enhance 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 does not solve the problem, the next step should involve hiring a professional credit card debt collection agency. Such agencies are well adapt at dealing with delinquent accounts and can take such responsibilities off the shoulders of your business. This will allow your business to allocate its resources to other areas besides the perpetual collection of delinquent accounts. Credit card debt collection is not always easy. Some account holders simply cannot or will not pay. However, if you take the proper steps to deal with the problem, you may discover these problems resolved in a more efficient manner than you thought possible.
It’s very important to mention that time is a crucial factor here. The earlier you can identify problem accounts, and outsource them at a reduced cost and time savings to those with better experience at handling them, the more money you will recoup sooner, and the more time and money you will save in the long run. The longer an account goes delinquent, the likelihood of recovering any money is reduced greatly.
Furthermore, take a look at more information, guidelines, and resources pertaining to credit card debt collection. David offers you additional information on the subject of business debt collection services.
