subject: Improve Your Credit Card Debt Collection Efforts With These Three Strategies [print this page] Improve Your Credit Card Debt Collection Efforts With These Three Strategies
If you're in the business of of issuing credit cards, an amount of financial risk is assumed, in that some customers, if not careful, can take on large amounts of credit card balances. It is also to be expected that there will be instances when some of those customers will default on their credit card responsibilities. As a lending institution, you need in place systems to address and collect this debt owed to you. If not, then your business can suffer great financial losses. It is just that simple.
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.
For sure, most people act responsibly, and they generally do not default on their credit card obligations. In some instances, there are extenuating circumstances, such as sudden unemployment, medical expenses from an illness, or other 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 implies, credit card debt collection involves the proper collection of money owed in an effective manner that properly follows the letter of the law. While debt collection is not always easy, if your company follows a few commonly established tips for success, the ability to properly collect money owed can be more achievable. Here are a few common tips for such success:
1. The first step to proper collections is to send a letter, called a demand letter, to the delinquent customer. This letter should explain the situation clearly, as well as list the exact amount that is past due. It should ask for prompt and full payment, while also informing the customer that they may present information that disputes the accuracy of the statements in the letter. Generally, these letters will provide a 30-day period for a response, as required by law. This is usually an adequate period of time to expect such a response.
2. If payment has not been made after this period, you should contact the customer by telephone within the 31-60 day time period. This call should ask for clarification as to why the debt is not satisfied. Then center on, and offer a repayment plan. If success hasn't been achieved during this period, the next time period, 61-90 days, should focus on sterner phone calls and letters informing the delinquent customer of the potential damage to their credit rating should the default continue.
3. If this doesn't solve the problem, the next important step is hiring an outside credit card debt collection agency. These agencies are very experienced at dealing with past due credit card accounts, and they can relieve your business of these responsibilities. This will allow you to focus your attention on your business' core and revenue-generating functions. Credit card debt collection can be difficult. Some past due customers cannot pay for reasons already discussed; others simply won't pay. However, if you take the proper steps to deal with this problem, you will find these better resolved in a more efficient manner.
It is very important to note that time is of the essence here. The sooner you can identify problem accounts, and outsource those at a reduced cost and time savings to those better equipped to handle them, the more money you'll recover sooner, and the more money and time you will save. The longer an account goes delinquent, you greatly diminish your likelihood of recovering any money.
