Creating a Visa/Mastercard for bad credit types

I think some of you guys are missing what I've been describing. It is a COMBINATION of a pre-paid debit card with credit card features so people can get all he benefits of a credit card (rent a car, hotel and restaurant reservations) etc. The caviot being with whatever they put up front is bonused up a certain balance so they can begin to have actual reported credit on their record. The is no way to go onto default because when the person signs up for the card they would be required to show job history and direct deposit info so as to be able to draw any payments from their paycheck before they even get paid. It would work exactly like those payday advance shops. The only credit theyre paying on is on the extended balance not their prepaid balance. Lowers the risk but increases the chance of a continued card user. Its both things that everyone is mentioning with a guaranteed payment feature. You still have to qualify but its no longer based on credit score...just a job and direct deposit with paychex.. Visa MC whatever. It can be done... Im surprised no companies are doing this yet.

subprime credit card is hard to get from banks. therefore, most cardholders are using debit cards now. the only downside is they can't do rental cars with a debit card.

 

I am driving a rental right now and I used my debit card as my security deposit. I have never been turned away from using my debit card on anything, as long as it has the visa or mastercard logo is all that matters.

 

I have been thinking of this exact idea for years now but never had the necessary capital to do it. I would love to be apart of it though

I think some of you guys are missing what I've been describing. It is a COMBINATION of a pre-paid debit card with credit card features so people can get all he benefits of a credit card (rent a car, hotel and restaurant reservations) etc. The caviot being with whatever they put up front is bonused up a certain balance so they can begin to have actual reported credit on their record. The is no way to go onto default because when the person signs up for the card they would be required to show job history and direct deposit info so as to be able to draw any payments from their paycheck before they even get paid. It would work exactly like those payday advance shops. The only credit theyre paying on is on the extended balance not their prepaid balance. Lowers the risk but increases the chance of a continued card user. Its both things that everyone is mentioning with a guaranteed payment feature. You still have to qualify but its no longer based on credit score...just a job and direct deposit with paychex.. Visa MC whatever. It can be done... Im surprised no companies are doing this yet.

 

 

So your going to garnish their wages but only if they dont make a payment?

Good to know the catalog market is dead, that would be my gut feeling as well

 

I like Swils idea, the makor hurdle is how to get a visa/master card in your businesses name think "Orchard Bank"

 

I know its profitable or else these major companies like the ones I mentioned wouldnt be out there for years serviceing this range of clients.

 

THink if how simple an affiliate marketing program could be setup to help get your card in front of the customers, that would be just another piece of the pie but a win win.

 

I love the paychex part, makes sense and why the hell wouldnt someone want a card like that especially if they have shit credit or just cleared a bk 7 or something.

 

I see a company that will set up an offshore bank for a relatively small investment, all complaince issues and software furnished to run like a bank. I wonder if this is nessesary in order to get on the hook with mastercard.

 

 

 

 

I can definitely see the major market that is available for something like this, but the capital expenditure would be massive.

 

Beyond that, there is a pretty significant labor overhead operating a business like that. Building out a call center, training employees, dealing with what is sure to be a significant turnover rate, etc.

 

Legal expenses, federal licensing (aren't you a financial institution now?), regulations, could all become outrageous.

 

Marketing expenses would be in the 7 figure range/yr without a doubt.

 

The overall formula of credit vs deposit vs income would have to be sorted out, most likely some trial and error. It definitely seems like a feasible idea, but wouldn't really be a money maker until you had clients numbering in the hundreds of thousands.

 

Could something like this be done without $50m liquid?

So your going to garnish their wages but only if they dont make a payment?

It's not wage garnishment it is a payment direct from their paycheck. Two completely different things. Scheduled on time on their paydays. Research "Payday Advance" first, it will give you good understanding of how those companies work. Like your check cashing liquor store or cornerside lotto ticket/check cashing place. They will "loan" you $500 for example on your next payday that amount plus interest is deducted from your paychek. Just look it up. If they can do it, so could a CC company no problem.

 

I see a company that will set up an offshore bank for a relatively small investment, all complaince issues and software furnished to run like a bank. I wonder if this is nessesary in order to get on the hook with mastercard.

Exactly my man...your offshore bank can also have debit cards created with the Visa/MC logo and accepted anywhere they are accepted. VERY easy, I've been researching starting an offshore bank over the past year. I have a TON of learned knowledge on the subject. In house: your bank would already have the infrastructure for creating the cards with the visa logo and electronic processing of debit from their accounts. Hey an even larger bonus is requiring them to open account at YOUR bank for this card.. Then all it is, is a matter of negotiating terms with the other providers (card processing, paychex set-up etc.) and it can be done.

 

I can definitely see the major market that is available for something like this, but the capital expenditure would be massive.

 

Beyond that, there is a pretty significant labor overhead operating a business like that. Building out a call center, training employees, dealing with what is sure to be a significant turnover rate, etc.

 

Legal expenses, federal licensing (aren't you a financial institution now?), regulations, could all become outrageous.

 

Marketing expenses would be in the 7 figure range/yr without a doubt.

 

The overall formula of credit vs deposit vs income would have to be sorted out, most likely some trial and error. It definitely seems like a feasible idea, but wouldn't really be a money maker until you had clients numbering in the hundreds of thousands.

 

Could something like this be done without $50m liquid?

Eh........not as much $$ as you'd think. And you're talking about US regulation.. Financial Institution/Credit Union vs Federally Chartered Banking Institution, HUGE difference. It's not as hard you my think. Too much info to elaborate here.

 

Oh and the marketing???? Psssssssss, cake. Imagine ONE commercial.

 

"Do you have a good job but can't even get a credit card? Have your recent setbacks due to this economy hurt your credit history but all you need is just another chance at establishing good credit? Have you had a bankruptcy and now have to buy everything with cash? well we have the solution for you............"

 

"the only Credit Card in the world where your job is your credit. No more being turned away because you don't have spotless credit score." blah blah blah..."CALL NOW 1-800-XXXX

 

Imagine the number of phonecalls................. there you go guys, I just made one of you very rich.

As someone that uses direct deposit to pay some of my employees, what your saying can be deducted on pay day but it would be easy for the card holder to rack up the card and then cancel direct deposit on his paycheck. A third party does not have control of the employees payroll account. Only way to be totally secure would be to hold a security deposit of the total amount of credit issued. The major credit card companies spend millions on figuring out new ways to make money, apparently providing credit to people that don't pay bills is not a good business model.

Swil... thanks for the info, sounds like you're very experienced. If you feel like writing a novel via PM i'd love to hear more about it

As someone that uses direct deposit to pay some of my employees, what your saying can be deducted on pay day but it would be easy for the card holder to rack up the card and then cancel direct deposit on his paycheck. A third party does not have control of the employees payroll account. Only way to be totally secure would be to hold a security deposit of the total amount of credit issued. The major credit card companies spend millions on figuring out new ways to make money, apparently providing credit to people that don't pay bills is not a good business model.

Again like I said they would STILL have to qualify (still run credit to verify other things rather than just score)...things like recent consistent payment of current active lines of credit on time for a period of lets say 6-12 months, along with job security of more than 6months, income verification (DTI not to exceed 45%), direct deposit set-up etc etc. Not everyone would qualify, that's not the point. It's an easier way of access to get credit, that's all it is...There is a niche of people that DO pay their bills but cant get any new credit. I think that process isn't any more risky than "good" credit people getting a CC right now anyways. It's all still based on history. PLUS if they want to cancel dierct deposit, it takes TWO pay periods (one month) before that posts. And you can actually eliminate that possible scenario if you OWN the accounts that are opened in the first place at your own bank (required deposit in our bank to get the credit). Anyone with an outstanding debit balance could be DECLINED and NOT processed for the cancelled ddepo until the balance is either secured by another deposit or it has been paid (whether in one month or more of Ddepo deductions)...done deal.

 

That's why you mitigate the majority of the risk by securing the credit line WITH an initial deposit. Some of you guys don't read full posts do you... There is of course some risk involved with "bonusing-up" the cash on deposit with some credit funds, but aren't you in business to take on some risk? That's how you make money..for example: $300 deposit gives you $600 credit. $600 = $1,000 and so on. You deduct from paycheck interest first, and let the balance float to continue to charge interest as the balance continues to increase, or entire balance payback per month close. A lot of ways to adjust and diminish risk. The point in this case is to build as many clients as quickly as possible. I've seen small banks grow by 50,000 new subscribers a month. Those that default are pretty much cancelled out by more new clients coming in.

 

Then imagine the scenario of being able to use cash on deposit money (like every bank in the world) to invest in capital markets and make double interest. THEN growing to the point of offering mortgages to the good credit holders. THIS is where you really start to make serious money. Borrowed cash to loan cash is sick. Mortgages are where it's at when it comes to banking, trust me......

 

As the saying goes: Scared money makes NO money.

TLDR

 

I still think you underestimate the amount of capital you'd need. Based on what I know about people who have shit credit and use $500 CC's, they rack up $500 super fast. Most people who don't have CC's get them so they can spend that money quickly now -- as credit. So if you have 50K clients per month, you need some serious capital just to extend as credit. And with all those customers you definitely need call centers and employees, as well as a pretty advanced back-end computer system to manage all this. There will be losses no matter what too.

 

I'll be honest, I think such an idea is beyond the financial means of people on here.

 

You may be able to do it on a smaller scale with like 1000 card holders, but I don't know how profitable that would be, and you'll still have some rather expensive start up costs.

NO reason today for this, they just do "prepaid" credit cards like "greendot" features.

Green Dot and prepaids do not report to the credit agencies

 

Green Dot and prepaids dont extent credit

 

See the differences now???

TLDR

 

I still think you underestimate the amount of capital you'd need. Based on what I know about people who have shit credit and use $500 CC's, they rack up $500 super fast. Most people who don't have CC's get them so they can spend that money quickly now -- as credit. So if you have 50K clients per month, you need some serious capital just to extend as credit. And with all those customers you definitely need call centers and employees, as well as a pretty advanced back-end computer system to manage all this. There will be losses no matter what too.

 

I'll be honest, I think such an idea is beyond the financial means of people on here.

 

You may be able to do it on a smaller scale with like 1000 card holders, but I don't know how profitable that would be, and you'll still have some rather expensive start up costs.

TLDR??!! Then don't respond... I think you underestimate the research I've done on this, for over a year already. I know the capital needed. Having access to PE (opm) also helps (which some people on here do have). It's doable. Don't believe it? cool. Do what you do... You haven't yet understood what having the power of fiat cash does for a banking institution.

 

I could explain it to you but you probably won't read that either.

 

It was a joke...

 

I would ask though, if it's so doable and such a good idea, why haven't you done it yourself and why would you share such an idea so openly?

 

Doable is pretty vague. What dollar amount do you put on starting this?

It was a joke...

 

I would ask though, if it's so doable and such a good idea, why haven't you done it yourself and why would you share such an idea so openly?

 

Doable is pretty vague. What dollar amount do you put on starting this?

No offense taken man. Next time use one of these: ...

 

I havent done it myself, because there are millions of ways to make make money, that is just ONE. It's an idea I've had for a while. Not necessarily the Credit Card thing (personally NOT interested in CCs), but I know how it could work an make money and am explaining it as such.. For me, more in regards to creating an actual bank and how streams of business come off of that... So it doesn't matter to me. Someone takes my idea they still have to compete, with me...And I welcome THAT challenge anytime and with anyone, anywhere.

 

Plus what we talk about here isn't like rocket science patented based stuff (THAT would be stupid). Anyone with a decent mind can come up with what we're talking about...

 

$ amount,for the CCs or for a bank?

^ both..

CCs: $2MM minimum (the cost of call centers is arbitrary so I wont get much into it. (I've created call centers for people with $50k and 10 people). Started my own with 3 people and $15k (to pay them) out of a garage (no rent), spent another $20k to market and calls were rolling in. Grew slowly but methodically. You want a center with 1,000 people then obviously cost is different. 20,50,100,200 callers, you lease space accordingly. Phones aren't much of a problem with all the specials these companies are coming out with, just stay away from VoIP. It's cheap but can't handle the bandwidth burned when everyone is on the phone at the same time (will cost you more money paying people to sit around while you have the phones worked on, I've seen it happen 1st hand with a collegue.) AT&T or Verizon will do you good for 20-30k a month. I'd say $3-4mil will get you throught the 1st year, but you better sell and start turning profit immediately. That old addage of be in business 2 years before turning profit does NOT apply here..I've seen some bad outcomes from guys growing too quickly.

 

Banking: A VERY abbreviated overview, there is a LOT more but I'm not writing a book...

 

This is based on United States Banking Law

 

US State or Federally Chartered Bank (this is what most of you have been thinking when it comes to costs) : REQUIRED $20MM minimum for licensing etc. (not even counting infrastructure, software etc.) then alot of other BS to go through (other licencing, classification investment bank or consumer bank, fees like crazy, registration per state to do business, registration per branch, recurring costs to ALL agencies just for being in business, the list goes on and on. Although there are other cheaper ways to acquire already chartered banks at discount (cheaper than you could imagine), you still obviously need to show you have the goods in your back pocket IF you want to be chartered and covered by the FDIC. Basically it's a "racket" that the government gouges smaller bankers. Probably end up costing upwards of $100MM-$300MM by the time it's all said and done and all proper hands have been "wetted". (I've done the math)

 

Credit Union: No Charter necessary just infrastructure and technology and start-up cash (government requirement). Arbitrary $5MM+ investment, what you spend is what you get/accomplish. Remember you can be ONE branch and cover an entire state...

 

Offshore Financial Institution, (no US banking rules apply): $200k-$2MM (dependant upon the district/nation). Infrastructure, software, licencing, incorporation etc.. After that it's arbitrary what you want to spend to set it up nice...you don't NEED a branch and can operate purely through the internet. Ever heard of ING Direct??

Or even easier get Swil to handle all the stuff for you, done deal!

 

I got a headache reading this thread

 

Swil you should start charging, have your own show on TV called "Finance for dummies with Swil"