Zero-LOC Card Funding Mechanism for Credit Risk Isolation
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Solution Overview
Problem
Existing credit card systems fail to provide a credit card with a zero line of credit (except for an optional overdraft limit) that can be funded by transferring funds from another credit card, lacking flexibility and accessibility for individuals and small businesses without the need for a credit check, and do not offer tailored credit card variations for specific uses such as teen cards, budgeting, privacy protection, or family-controlled spending.
Innovation Solution
A credit card system and method that issues a zero-LOC card with a unique identification number and optional overdraft limit, funded by transferring funds from a funding card account, allowing for sub-product codes to enable various credit card vehicles, including teen, budget, privacy protection, and family-controlled cards, without requiring a credit check, and enabling payments or personal loans.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If traditional credit cards are issued to individuals, then credit access is provided, but credit risk increases for issuers and not all individuals qualify
Solution Approach 1:
The patent introduces a parent account holder as an intermediary who provides funding to the subsidiary card account. This mediator assumes the credit risk, allowing the subsidiary card to be issued to individuals who would not normally qualify for traditional credit cards, thus improving accessibility without increasing issuer risk.
Solution Approach 2:
The patent segments the credit relationship into two distinct accounts: a parent account that bears the credit risk and a subsidiary card account that provides spending access. This segmentation allows the credit risk to be isolated to the parent account holder while enabling broader card issuance through the subsidiary accounts.
2Ease of operation
If credit cards with fixed spending limits are issued, then spending control is provided, but flexibility for different use cases is reduced
Solution Approach 1:
The patent enables dynamic adjustment of spending limits and funding amounts for subsidiary card accounts. The parent account holder can modify the credit line and funding levels as needed, allowing the same subsidiary card infrastructure to adapt to different spending control requirements across various card product types.
Solution Approach 2:
The patent creates a universal subsidiary card account system that can serve multiple functions and use cases. By allowing configurable spending limits and funding sources, the same technical infrastructure supports teen cards, budget cards, privacy cards, and other specialized card products without requiring separate systems.
3Productivity
If subsidiary card accounts are created with spending capacity, then transactional credit is enabled, but debt accumulation risk increases
Solution Approach 1:
The patent implements a feedback mechanism where the parent account holder receives notifications and can monitor spending patterns of subsidiary card accounts. This allows the parent to adjust funding levels and spending limits in response to observed behavior, enabling transactional credit while maintaining debt control through active monitoring and adjustment.
Data Source
AI summary
A credit card and credit card payment system includes a zero-LOC card account having an associated zero-LOC card with a unique identification number and a zero line of credit. The issuer of the zero-LOC card assumes no credit risk. This zero-LOC card account is independent of a funding card account, such that the zero-LOC card is funded, at some point before use, by at least one funds transfer from the funding card account to provide a positive credit balance in the zero-LOC card account. At the point of use, zero-LOC card functions just like a regular credit card except for the fact that a debit/payment transaction on the zero-LOC card is authorized using the available credit balance on the zero-LOC card account instead of the available line-of-credit as in the case of a regular credit card.