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 limit.
  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.

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. See About Fees for additional information about setting up 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).

Overview of secured credit accounts

To create a secured credit account, you start with a conventional primary checking account and add to it a secondary collateral (secured) account and a credit account.

The cardholder deposits funds into the collateral account and the amount in the collateral sets the credit limit for that card. For example, if a cardholder deposits $200 in the collateral account, the credit limit on the card is $200. If the cardholder deposits an additional $200, the credit limit increases to $400.

If a cardholder fails to pay the full amount of a monthly bill, you can decide whether to pull funds from the collateral account to pay the rest of the bill, or you can decide that the account is in default and close it. If you transfer funds from the collateral account to pay the bill but do not close the account, the credit limit is reduced by that amount.

Example scenario

Sally is 19 and has a checking account with you. She is unable to obtain a traditional credit card because she does not have a credit history. You offer a secured credit program to customers like Sally who want to build a credit history, and Sally enrolls. After you approve her application, Sally transfers $500 from her checking account into a new collateral account. She is issued a charge card against her new credit account. Later, Sally makes a payment for $100 using her charge card. At the end of her billing cycle, she is billed for the full amount, due on a specified date. If Sally pays the full amount on time, a positive record of the billing cycle is sent to the credit bureaus. Consistent positive reports build her credit. If Sally misses a payment, you can move funds from the collateral account to cover the payment. In this case, a negative record of the billing cycle is sent to the credit bureaus.

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. The customer moves a quantity of funds into the collateral account, which serves as the credit limit for the charge card.
  5. 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. The cardholder moves a quantity of funds into the collateral account, which serves as the credit limit for the charge card.
  3. You issue a charge card to the customer and the customer activates it.

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