3 Important Steps To Improve Credit Card Debt Collection Efforts

By: David P. Montana


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.
Keep in mind, most people are responsible, and generally do not default on their credit card obligations. Often, there are external factors such as the loss of income, medical bills, or other calamitous circumstances that lead to the problem.
However, the credit card issuer must engage in some form of debt collection regardless of the individuals circumstances. This is because the issuer will need the revenues to maintain the health of the business as well as the proper relationship with those that 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 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 time, the 31-60 day window should involve a direct call to the debtor. This call should ask for clarification on the situation and center on a repayment plan. If nothing is achieved during the time frame, the 61-90 day period should center on sterner phone calls and letters informing the debtor of the damage to their credit rating in the event of a default.
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'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.

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David Montana is a renowned expert, consultant and author in the field of commercial debt collection services. For more tips and information on credit card debt collection, click here.

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