Refinancing System for Credit Card Interest Reduction
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Solution Overview
Problem
Traditional credit card transactions often result in high interest rates due to daily compound interest, with limited flexibility in payment terms, making it difficult for customers to manage large purchases within the credit card grace period without incurring significant interest charges.
Innovation Solution
A system and method for refinancing purchasing transactions using a mobile app or web browser interface that assesses a customer's credit risk and FICO score to offer personalized loan terms, allowing customers to refinance eligible credit card purchases with lower interest rates and longer repayment durations, tailored to their financial situation.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If credit card is used for purchase, then convenience of having one invoice payable once per month is provided, but high interest rate is charged when balance is not paid within grace period
Solution Approach 1:
The patent introduces a third-party refinance service as an intermediary between the credit card issuer and the cardholder. This intermediary pays off the credit card balance and provides a new loan with lower interest rates, effectively mediating the harmful high-interest situation while preserving the convenience of consolidated monthly payments
Solution Approach 2:
The patent changes the interest rate parameter by transitioning from the credit card's high APR (e.g., 29.99% compounded to 34.96% effective annual rate) to a refinance loan's lower fixed interest rate. This parameter change directly reduces the harmful interest charge while maintaining the payment convenience structure
2Use of energy by moving object
If credit card grace period is used, then money can be kept invested at return until payment is due, but compound interest is charged if balance is not paid by due date
Solution Approach 1:
The patent applies preliminary action by having the refinance service pay off the credit card balance before the grace period expires. This preemptive payment prevents the cardholder from accidentally incurring compound interest while allowing them to maintain their investment strategy, as the refinance loan provides a structured repayment plan that eliminates the all-or-nothing pressure of the grace period
3Object-generated harmful factors
If refinance loan with lower interest rate is taken, then overall cost of purchase is reduced, but additional loan application process and credit assessment are required
Solution Approach 1:
The patent implements self-service by allowing cardholders to initiate the refinance process themselves through a user-friendly application. The system automatically performs credit assessments, calculates potential savings, and presents refinance offers without requiring extensive manual intervention from lenders or brokers, thereby reducing the perceived complexity for the consumer
Solution Approach 2:
The patent incorporates feedback mechanisms that provide cardholders with real-time information about their creditworthiness, eligible refinance amounts, and potential interest savings. This transparent feedback loop helps users understand the process and make informed decisions, reducing the psychological complexity even though the procedural steps remain
Data Source
AI summary
A web based finance system allows users to refinance past eligible purchasing transactions. The system can include a system server(s) which is in communication through a network with client computing devices associated with customers. The server can receive customer information and determine a refinancing value range based upon the user has a bank account and/or credit risk rating information. The server can identify prior eligible credit card purchases for refinancing and the customer can select one or more purchases for refinancing and the refinancing loan terms.