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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, 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#

Program Structure#

We have structured this charge card flow of funds to optimize capital efficiency and minimize your overhead.

  1. Client Charge Card Line of Credit#

Your bank partner will provide you with a Charge Card Line of Credit as part of your onboarding process, setting the aggregate amount of credit you can then extend to your end customers. This limit can be periodically reevaluated as your program matures.

  1. Funding Account#

You will fund an operational account, referred to here as a Funding Account, in order to 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 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.

  1. Customer Credit Account#

Credit accounts are the way credit products are represented on the Unit platform. Credit accounts have a defined credit limit, and similar to deposit accounts, they also have elements representing the account balance (the amount the customer owes) and the available User Spending Limit (the amount the customer can spend). 

In this case, you will create a credit account, and issue charge cards connected to that account.

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

User Spending Limit

You will determine the appropriate limit per customer credit account based on your eligibility criteria, referred to here as the User Spending Limit. This limit can be updated at any time. The total aggregate limit of issued cards cannot exceed the limit on your Charge Card Line of Credit.

Cards#

You will issue physical and virtual charge cards to each end customer. These cards are used to access the credit account. Daily and monthly limits can be set on each card.

Credit Terms#

Business Charge Card accounts will be governed by a set of credit terms. A customer credit account cannot be created without credit terms. Unit will configure these terms for you in production prior to going live.

  1. Customer Spend#

When the customer uses their charge card, Unit will verify that there is sufficient available User Spending 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 User Spending 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 User Spending Limit will be unchanged (unless a purchase settles at a higher amount than originally authorized, like a restaurant tip).

You will have a dedicated org account that represents the total amount customers owe you at any point in time. The balance of this account will change every time a customer spends using a charge card.

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. A charge card Reserve Account will be created for your org. 

  1. Bank Repayment#

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.

  1. Customer Repayment#

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 have to facilitate the repayment by creating a Repayment using the Unit API. Under the hood, repayments are done using book payments or originated ACH debits.

Once the customer repayments posts, it will impact the balance of their credit account, as well as the balance of your org loan account. The repayment funds will be deposited into an account of your choosing on the Unit platform (by default, your funding account).

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/or 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 template, 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.

Our Marketing Guide contains general guidance for any marketing materials. Charge cards have some additional or different requirements:

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#

In Beta, Unit will not generate a charge card statement at the beginning of the repayment period, you will be responsible for ensuring your customer is aware of the amount due by the end of the repayment period.

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

The repayment period between you and end customers is unrelated to the daily repayment cycle with your bank partner. During the Beta period, the end customer repayment period will be end of month, eg. for purchases made Jan 1 through Jan 31, the payment will be due by Feb 28.

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 allocated, only Org Tokens have the repayments scope.

  • If the repayment is a book payment, the balance will decrease and available User Spending Limit increase immediately.
    • Currently, a book repayment will require that the source deposit account is held under the same bank partner as the customer credit account.
  • If the repayment is an ACH debit, it will only decrease the balance and increase the available User Spending Limit once the clearing period is over.
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To prevent overpayment, repayments cannot exceed the outstanding balance.

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.

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

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Frozen accounts cannot accept repayments. You should freeze the associated cards, not the account, in the event of a late repayment to prevent additional spend.

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.

Any collections activities must comply with relevant laws and regulations. Expect for Unit Compliance to review your policies if applicable.

Returned Repayments#

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

If an end customer’s repayment is returned:

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

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 User Spending 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 org loan account balance 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 will review your:

    • Repayment authorizations
    • Charge Card Program Terms of Use
    • Eligibility Criteria
    • 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#

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

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.

  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.