Business Charge Cards

What is a charge card?

Charge cards are a type of credit card. They have a credit limit and a fixed repayment cycle, and the customers that received the credit must pay the balance in full at the end of every repayment period. Customers cannot carry a balance between repayment periods, and therefore there is no Annual Percentage Rate (APR), or interest that is being charged.

The full functionality that Unit offers on debit cards is available on business charge cards as well, including unlimited physical and virtual cards & cardholders, custom card designs, ability to add to mobile wallet, daily and monthly card level limits, and programmatic authorization of card use.

Commercials

The main revenue stream generated by charge cards is Interchange. A card swipe transaction will typically yield, on average, 0.5% more in interchange revenue when done with a credit card compared to a debit card. 

Building a Business Charge Card Program

1. Daily Spend and Program Size Limits

Your bank partner will provide you with a line of credit as part of your onboarding process. This will include a Daily Spend Limit for your program. This represents the maximum amount of spend transactions that can be authorized in a given calendar day.

The aggregate value of credit limits you can extend to your end customers will be represented by your Program Size Limit. If your Program Size Limit is, for example, $15m, then the sum of all end customer credit limits under your program can be, at most, $15m.

Your Program Size Limit may be equal to or greater than your Daily Spend Limit. Both can be periodically reevaluated as your program matures.

2. Funding Account

You will fund an operational account, referred to here as a Funding Account, in order to fund your end customer's spend activity and facilitate automatic daily repayments to your bank partner.

There must be sufficient funds available in the Funding Account to cover the aggregate daily charge card spend of your end customers. If a customer attempts to transact and the amount is not available in your Funding Account, the authorization will be declined.

You will be able to monitor the balance of the Funding Account through the Unit Dashboard and API. 

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The required funding amount for your Funding Account should take into consideration a number of factors, including your expected end customers' spend utilization. You will determine the amount and frequency at which to replenish the Funding Account.

3. Customer Credit Account

Credit accounts are the way credit products are represented on the Unit platform. You will create a credit account, and issue charge cards connected to that account. Credit accounts have a:

• Credit limit, the maximum amount the customer could owe
• Balance, the amount the customer currently owes
• Hold, the amount of transactions pending
• Available Credit Limit, the maximum amount of further spend possible for the credit account. This is calculated by subtracting the Balance and Hold from the Credit Limit.
• A set of Credit Terms

Credit accounts can be created for only business customers at this time.

Credit Limit

You will determine the appropriate Credit Limit per customer credit account based on your eligibility criteria. This limit can be updated at any time. The aggregate credit limits of your customer credit accounts cannot exceed your Program Size Limit.

Credit Terms

Customer credit accounts will be governed by a set of credit terms, including

• Daily spend limit for a credit account and all associated cards.

  • This is typically used as a fraud control for preventing a full Credit Limit from being spent in the event a card is compromised.

• The clearing period for ACH Repayments

• Maximum amount of Physical or Virtual cards that can be created

A credit account cannot be created without credit terms. Unit will configure these terms for you in production prior to going live.

Cards

You will issue physical and virtual charge cards to each end customer. These cards are used to access the credit account and can be added to mobile wallets.

Card Limits

You can set the maximum amount a card can spend in a given day or month. Different limits can be set for each card associated with the account. Currently, card limits cannot be greater than the daily spend limit configured on your credit terms.

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Currently cards associated to credit accounts cannot be used at ATMs. Therefore, the ability to set or manage a corresponding PIN is not supported.

4. Customer Spend

When the customer uses their charge card, Unit will verify that there is sufficient available Credit Limit on the credit account, sufficient balance on your Funding Account, and that the daily and monthly card and account level limits are not exceeded. If all of these conditions are met,

• An authorization will be created. This will create a hold on the customer credit account, and the available Credit Limit will decrease by the amount of the hold.
• When the authorization posts to Unit's ledger, a transaction will be created. The customer credit account’s balance will increase and the available Credit Limit will be unchanged (unless a purchase settles at a higher amount than originally authorized, like a restaurant tip). The hold will be reduced by the amount of the transaction.

You will be able to see the total amount your customers owe you at any point in time in the dashboard.

Reserve Account

While the Funding Account will ensure all customer transactions are repaid to your bank partner daily, a reserve account will still be used in cases such as card activity disputes. The reserve formula will be a function of your expected spend utilization. A charge card Reserve Account will be created for your org. 

5. Bank Repayment

The amount you currently owe to the bank will be displayed in the Unit Dashboard under an Org Loan Account. At the end of every day, Unit will facilitate an automatic repayment from your Funding Account to the bank, to repay your total customer spend that day.

This transaction will reset your available Daily Spend Limit to support the subsequent day’s spend.

6. Customer Repayment

The amount your end customers currently owe to you will be displayed in the Unit Dashboard under an Org General Ledger Account. At the end of each repayment period (in the beta period, it will be month end), the customer will have to repay their balance. You will facilitate the repayment by creating a Repayment using the Unit API. Under the hood, repayments are book payments or originated ACH debits.

You can specify where repayment funds will be deposited, into an account of your choosing on the Unit platform, when the repayment is created.

Once the customer repayments posts, it will decrease the balance of their credit account and increase their available credit limit as well as decrease the aggregate balance your end customers owe to you.

Your Responsibilities

Eligibility Criteria

You will be responsible for developing the customer eligibility criteria to open a credit account. We recommend keeping your eligibility criteria simple to start, and developing a more robust rule set over time. Unit and your bank partner will review your eligibility criteria before going live.

You should retain all documentation and data sources used for decisions made by your eligibility criteria.

In the event a customer is deemed ineligible, they will need to be informed of the reason(s) they were not approved, called an Adverse Action Notice. This notice can be delivered directly in your UI or via email. Unit can provide a general template, however, if your eligibility criteria is more complex (ie. uses 3rd party information), you will need to create a template that complies with regulation for the Adverse Action notice.

General Adverse Action Notice Template
"We're sorry. You can’t get a [Product Name] at this time. We require [insert relevant eligibility criteria]. You won’t be able to get a [Product Name] until these conditions are met."

You can choose to include the required Equal Credit Opportunity Act disclosure, below, in each Adverse Action Notice or in your Charge Card Program Terms of Use.

Equal Credit Opportunity Act disclosure

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The Federal agency that administers compliance with this law concerning this creditor is FTC Regional Office for the region in which the creditor operates or Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.

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If you have questions about defining eligibility criteria, please contact your Success Manager.

End Customer Terms and Conditions

An end customer will need to be presented and consent to terms and conditions when opening a charge card, this includes

• Charge Card Program Terms of Use - defines the terms of your specific charge card program, including the repayment obligations of your end customer. You will draft your Terms of Use and Unit and/or your bank partner will review.

  • If you have not included the ECOA notice in your Adverse Action notice, it needs to be included here.

• Authorized User terms - governs the use of the charge card issued by your bank partner. Unit has a template for these terms.

• Your Privacy Policy

• Consent to Electronic Disclosures

Marketing

The Business Charge Card cannot be marketed as a Credit Card. It is specifically a charge card.

Required Disclosure
"[Client Name] is a financial technology company and not a bank. Banking services are provided by [Bank Partner], Member FDIC. Visa® Cards are issued by [Client Name]’s partner banks pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted."

Repayments

You will also orchestrate repayments, which can either be periodic automatic repayments or one time repayments.

While a periodic statement is not strictly required, you will be responsible for ensuring your customer is aware of:

• Balance, adjusted for any payments made before cycle end
• Date on which payment will be due
• If you do have automatic repayments, what account they're set to pull from

The repayment period between you and end customers is unrelated to the daily repayment cycle with your bank partner.

When the end customer repays their credit account balance, funds will be repaid into a deposit account for your org. You can elect repayments to be deposited in the Funding Account, or another deposit account created specifically for repayments. Because there is optionality for where repayment funds can be deposited, only Org Tokens have the repayments scope.

Repayment Types

1. Book repayment: the credit account balance will decrease and available Credit Limit increase immediately.

   • Currently, a book repayment will require that the counterparty account is held under the same bank partner as the destination account of the repayment.

2. ACH Repayment: the credit account balance will only decrease and available Credit Limit increase once the ACH debit clearing period is over.

   • Note that, unlike a DepositAccount, a CreditAccount does not have a specified routing and account number for recognition in the ACH network. As such, ACH Credit originated externally cannot be used to repay a credit account.

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To prevent overpayment, repayments cannot exceed the outstanding balance, less any pending repayments.

Repayment Frequency

One Time Repayments

You must allow your customers to pay all or part of their balance early, via one time repayments, which will be either book repayments or ACH. Authorization is required for repayments.

Automatic Repayments

You can offer Automatic Repayment functionality to your end customers to repay their previous balance (this cannot include current cycle purchases).

They will need to authorize an automatic repayment. Your end customer should be able to revoke their authorization for automatic repayments at any time.

To prevent overpayment, an automatic repayment amount must be decreased if a one time repayment has been made or skipped if the balance has already been paid in full. An automatic repayment cannot include purchases made in the current period.

 

For example,

• Your end customer’s billing period ends with a balance of $350. This amount is disclosed to your end customer.
• They make a one time repayment of $50 via ACH debit which posts after the clearing period. (Balance is now $300)
• They make a new transaction of $75. (Balance is now $375)
• The automatic repayment on their due date is then adjusted to $300. It does not include the purchases made in this period. (Balance after automatic payment posts is now $75)

Late Repayments

You will be responsible for determining when a repayment is late.

You can assess a reasonable late fee, which needs to be in line with the balances owed. As an example, a $100 late fee for a $5 monthly repayment would not be reasonable. Your bank partner and Unit will have oversight on any fees imposed. You can reverse fees as necessary.

In the event a customer does not repay their balance in full on time, you can freeze the account to prevent further spend. If the balance is then repaid, you can unfreeze the account.

If the balance is not repaid in full after three ACH Debit attempts (eg. insufficient funds), you can close the end customer’s credit account. The three attempts must be made within 180 days of the corresponding purchase date.

Returned Repayments

When an end customer initiates an ACH Debit repayment to their credit account, the balance and available Credit Limit will remain unchanged until the repayment posts.

If an end customer’s repayment is returned:

• Before it has posted, their balance and available Credit Limit remain unchanged.
• After it has posted, their balance increases by the amount of the returned repayment and the available Credit Limit remains unchanged. This may cause the customer credit account to go over their Credit Limit if they have spent further after the repayment originally posted.

Rewards

You can use Unit's Rewards API to send rewards to your end customers by specifying the receivingAccount with type creditAccount.

• When you send rewards to a credit account, you are reducing the balance of that account, and in effect the amount that customer will ultimately repay to you. This will also increase your end customer's available credit limit.
• Since this is simply reducing a balance owed, there is no actual fund movement (eg. the reward amount does not need to come out of your revenue account). Therefore you should not specify a fundingAccount in your request.
• You cannot issue a reward that would cause a credit account's balance to go below $0.

Account Management

You will be able to close a credit account (which will also close any cards associated with the account), or freeze (and unfreeze) a customer credit account. 

You also will be able to update your end customer's Credit Limit at any time.

 

Closed accounts cannot accept repayments. An end customer should not be able to close an account with an outstanding balance or pending authorizations if you still expect repayment. You can instead close the associated cards to prevent further spend.

If you close an account with a non-zero balance, the balance will be set to $0 and your aggregate outstanding balance from end customers will be reduced by the same amount. This means that you are writing off the loan and taking a loss.

Implementation

Legal

• Your agreements with Unit and your bank partner will need to include the Business Charge Card terms.
• For your end customer, Unit and your bank partner will provide templated Authorized User terms and conditions for card issuance.
• In addition to the Authorized User terms, you will need to provide Charge Card Program Terms of Use to your end user allowing their use of your Charge Card Account and defining other aspects of the program. These will be drafted by you with Unit reviewing prior to going live.

Compliance

• The Unit Compliance team will assist in onboarding your charge card program, including any additional due diligence or bank partner approval required.

• The Unit Compliance team and your Bank Partner will review your:

  • Repayment authorizations
  • Charge Card Program Terms of Use
  • Eligibility Criteria
  • Adverse Action notice
  • Collections policy, if applicable
  • Other documentation as required by the bank

• Marketing of the Charge Card program will be subject to ongoing review by Unit Compliance

Technical Implementation

Review Unit's documentation for credit accounts.

1. Create a customer resource via a business application if the customer does not already exist.

2. Create a credit account for the customer.

   • Specify the credit terms and credit limit.

3. Create physical or virtual cards with type set as businessCreditCard or businessVirtualCreditCard

4. Maintain the repayment period, including making the end customer aware of outstanding balance from the previous period.

5. Use Unit's Repayment capabilities (book payment or ACH) to orchestrate repayment.

Going Live

You will need to have a pen test completed for your charge card end points. This includes programs that are already live with other products.

1. Execute legal agreements to participate in the Charge Card program, including a Business Deposit Agreement for the Funding, Reserve and Revenue accounts

2. Unit will then enable your org for charge cards

3. Fund the Reserve and Funding Accounts created for you by Unit

4. Receive the credit terms created for you by Unit, including your expected

   1. Card Issuing Fee
   2. Account-level daily spend limit
   3. Max number of physical cards
   4. Max number of virtual cards
   5. Clearing days for repayments

5. Create your first credit account and cards

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If you are already live in production with Unit, you will not need new API keys.