Credit card refinancing

While payments are organized in cycles, some cardholders might miss due dates and build up a debt that becomes hard to pay off in a single cycle. On the other hand, some account holders might have extra income that allows them to pay off their future debt, alleviating the impact of interest on their finances.

The statements displayed in the figure below can serve as a base scenario for examples of how you can renegotiate credit card debt on the Pismo platform. To keep things simple, the examples ignore interest accrual on overdue payments.

Cycle 1 shows a statement with an overdue transaction amount of $100. Cycle 2 shows two transactions in the current statement for $100 and $50. Cycle 3 shows one transaction of $40 in a future statement, plus $10 interest. The card has a total balance of $300.

Payment agreements

Payment agreements let you give your customers options to manage their cash flow and negotiate payment conditions. The Pismo platform offers the following types of payment agreements.

• Installment agreements—Used to renegotiate the overdue debt for a credit card account
• Statement agreements—Used to renegotiate all debt for a credit card account
• Compulsory agreements—A compulsory agreement is the same as an installment agreement, except that the compulsory field is set to true, indicating that it's the result of a renegotiation that was made independently of the customer.

Installment advancements

An installment advancement is a way to settle future debt in the current cycle, rather than in a future cycle. Essentially, it’s a cash flow management feature. Use the Create installment advance without interest API for advancements.

When there's interest applied to a transaction brought from a future statement to a current one, the platform removes all interest and updates the transaction amount. Refer to the figure below.

In Cycle 2, the cardholder advanced the future transaction into the present. By doing this, they excluded the transaction’s interest charges of 10. So now, they can pay their debt in full with a payment of 290. If no installment advancement had been done, the amount paid to settle all debt would have been 300.