About Galileo Secured Credit

With Galileo Secured Credit, you can give your customers an opportunity to build a credit score, help protect your customers from falling into a debt cycle, and minimize your own risk. With Galileo Secured Credit, the credit that you extend to each customer is backed by their own funds, making it an effective credit-building program. Here is a brief overview of how it works:

  1. The credit extended to each cardholder is backed by funds in a separate collateral account.
  2. At the end of each billing cycle, the cardholder is billed for the full amount owed against the credit line.
  3. If the cardholder does not pay the full amount, you can decide to pull funds from the collateral account, reducing your risk of loss.
  4. You may report payment activity to credit bureaus so that the cardholder can build a credit score.

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Note

For clients who offer Mastercard products, Galileo recommends the Dynamic Funding model for secured credit, which offers more automation for you, and more flexibility of funds for your customers. The details are described later in this guide, under Dynamic Funding.

Galileo Secured Credit is a charge card product, rather than a traditional revolving credit product. This means that the balance is due in full at the end of each billing cycle, cardholders are not offered a minimum payment, and they cannot carry a balance into the next month. Interest is not assessed on Galileo Secured Credit products, but you can source revenue from interchange (the amount paid to you by card networks). You may also assess optional fees, such as program fees and late fees. Be aware that the charge card associated with secured credit is often referred to as a credit card in marketing materials.

Galileo Secured Credit use cases

Depending on how you set up your secured credit offering, you can support these use cases:

  • Young adults with little or no credit history can build or improve their credit history.
  • Individuals with poor credit histories can improve their credit rating.
  • Adults with no credit history, such as immigrants to the United States, can establish a credit history.
  • Flexibility to book car rentals and hotels (this is an optional configuration that can be disabled).

Dynamic Funding

Galileo Secured Credit: Dynamic Funding builds on the standard Galileo Secured Credit product and may be configured by clients who offer Mastercard products. Like standard Secured Credit, the Dynamic Funding product offers your customers an opportunity to build credit while minimizing your risk. Dynamic Funding also has these additional features:

  • Real-time funds movement — Galileo handles funds movement between the primary account and the collateral account for you in real time, unlike standard secured credit.
  • Access to funds — Funds only move to the collateral account after a credit purchase is made, unlike standard secured credit. This means that customers can access all of their available balance, and do not keep a constant amount in the collateral account.
  • Account-based line of credit — The line of credit is determined by the amount in the primary account, meaning that you do not need to adjust the credit limit. This is unlike standard secured credit, where the credit limit must be adjusted when funds are moved into or out of the collateral account.

With Dynamic Funding, funds are moved in real-time to the collateral account only when the customer makes a credit purchase, and funds are moved back to the primary account when the customer pays back the amount of credit used. This means that the customer has ready access to their funds without keeping a balance in the collateral account. For example:

  1. A customer attempts a purchase for $40 using their charge card configured for Dynamic Funding.
  2. Galileo checks whether the primary account balance contains at least $40.
  3. If the primary account does contain at least $40, the purchase is authorized. Galileo moves $40 from the primary account into the collateral account and notifies you that the authorization was successful.
  4. If the primary account does not contain at least $40, the authorization request is declined.

Dynamic Funding also means fewer manual operations for you. Galileo provides the real-time funds flow, account ledgers, and transaction processing. Galileo also tracks the credit line. Unlike standard secured credit, you do not need to manually set the credit limit because the credit limit is determined by the amount in the primary account.

Overview of secured credit accounts

To create a Galileo Secured Credit account, you start with a conventional primary spending account and add on both a secondary collateral account (also called a collateral account) and a credit account. For a Dynamic Funding product, the primary account must be an account in the Galileo system.

The cardholder’s line of credit depends on whether you have configured a Dynamic Funding product.

  • Accounts with Dynamic Funding — The cardholder’s line of credit is the amount in their primary account. When a credit purchase is made, the exact funds for the purchase move to the collateral account.
  • Accounts without Dynamic Funding — The cardholder’s line of credit is the amount that they deposit in their collateral account. For example, if a cardholder deposits $200 in the collateral account, the credit line on the card is $200. If the cardholder deposits an additional $200, the credit line increases to $400.

For either configuration, if a cardholder fails to pay the full amount when the bill is due, you can decide whether to pull funds from the collateral account to pay the remaining amount, or you can decide that the account is in default and close it.

Customer onboarding experience

For your customers, the onboarding experience will depend on whether they already have a primary account with you or if they are signing up for a charge card for the first time.

New customer onboarding experience

  1. The customer applies for the charge card and you approve the application.
  2. The customer deposits funds into a new primary account.
  3. You create a new collateral account and credit account.
  4. For accounts with Dynamic Funding, the collateral account balance remains at $0.00 until the customer makes a purchase with the charge card.
  5. For accounts without Dynamic Funding, the customer moves a quantity of funds into the collateral account, which serves as the credit line for the charge card.
  6. You issue a charge card to the customer and the customer activates it.

Existing customer onboarding experience

  1. The customer requests a charge card and you approve the request.
  2. For accounts with Dynamic Funding, the collateral account balance remains at $0.00 until the customer makes a purchase with the charge card.
  3. For accounts without Dynamic Funding, the cardholder moves a quantity of funds into the collateral account, which serves as the credit line for the charge card.
  4. You issue a charge card to the customer and the customer activates it.

Customer purchasing experience

The customer purchasing experience depends on whether you configure your Galileo Secured Credit product with Dynamic Funding. A customer enrolled in a Dynamic Funding product can build credit while keeping all of their available funds in the primary account. The Dynamic Funding collateral account is set to a balance of $0.00 until a credit purchase is authorized.

Dynamic funding results in an improved customer experience over a standard Galileo Secured Credit product because customers do not need to have “double the funds” (both an unusable amount in the collateral account and enough funds in the primary account to pay off the credit balance). The amount for the credit purchase is held in the collateral account only until the credit balance is paid off.

Making a purchase with Galileo Secured Credit: Dynamic Funding

  1. The customer attempts a purchase with the charge card.
  2. The purchase is authorized based on the line of credit, which is determined by the amount in the primary account.
  3. The funds for the purchase are moved to the collateral account.
  4. When payment is due, the customer may decide to pay from the primary account or release the collateral funds as payment.
  5. The customer’s payment activity is reported to the credit bureaus.

Making a purchase with standard Galileo Secured Credit

  1. The customer attempts a purchase with the charge card.
  2. The purchase is authorized based on the line of credit, which is determined by the amount in the collateral account.
  3. When payment is due, the customer may decide to pay from the primary account or release the collateral funds as payment.
  4. The customer’s payment activity is reported to the credit bureaus.

Your responsibilities

When you offer a Galileo Secured Credit product, your primary source of revenue for the product is the interchange that you receive from the card networks. Setting up and administering a secured credit product is a complex process, which may require a significant investment from you. Galileo can handle some tasks for you, such as account setup, processing, and credit reporting, while you are responsible for the following:

  • Consent to the terms of the program
  • Establish 3-party credit reporting contracts between the credit bureaus, your partner bank, and Galileo
  • Obtain approval from your partner bank for:
    • The secured credit financial product
    • A new set of credit BINs
  • Obtain card network approval for the credit BINs
  • Set up application and underwriting rules for customers to qualify for the charge card
  • Provide terms and conditions for your customers
  • Set up funds movement with your partner bank
  • Set up a collections method
  • Provide sufficient technical personnel, including a dedicated technical product manager, to administer the product
  • Train customer service representatives (Galileo offers training services)
  • Create and manage customer accounts
  • Provide a platform for your customers to use your secured credit product
  • Provide secured credit explainers for your customers

See Setting Up Galileo Secured Credit for more information on some of these responsibilities and how you can work with Galileo to configure your secured credit product.


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