U.S. patent application number 13/732939 was filed with the patent office on 2013-12-19 for method and apparatus for allowing secured overdrafts of reloadable debit card accounts.
The applicant listed for this patent is Sean MacGuire. Invention is credited to Sean MacGuire.
Application Number | 20130339239 13/732939 |
Document ID | / |
Family ID | 38519089 |
Filed Date | 2013-12-19 |
United States Patent
Application |
20130339239 |
Kind Code |
A1 |
MacGuire; Sean |
December 19, 2013 |
Method and Apparatus for Allowing Secured Overdrafts of Reloadable
Debit Card Accounts
Abstract
The invention discloses a reloadable debit card which may be
overdrawn by authorized merchants thus allowing future and
recurring payments to be made via ACH transactions against this
debit card. In addition, the cardholder may repay indebtedness
simply by depositing funds onto the reloadable debit card.
Inventors: |
MacGuire; Sean; (Key West,
FL) |
|
Applicant: |
Name |
City |
State |
Country |
Type |
MacGuire; Sean |
Key West |
FL |
US |
|
|
Family ID: |
38519089 |
Appl. No.: |
13/732939 |
Filed: |
January 2, 2013 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
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13246413 |
Sep 27, 2011 |
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13732939 |
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11701174 |
Feb 1, 2007 |
8027919 |
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13246413 |
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60763956 |
Feb 1, 2006 |
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Current U.S.
Class: |
705/44 ;
705/39 |
Current CPC
Class: |
G06Q 20/22 20130101;
G06Q 40/025 20130101; G06Q 20/26 20130101; G06Q 40/00 20130101;
G06Q 20/105 20130101 |
Class at
Publication: |
705/44 ;
705/39 |
International
Class: |
G06Q 20/26 20060101
G06Q020/26 |
Claims
1. A method for providing overdraft funds to at least one user, the
method comprising the steps of: a) having the user conduct a
purchase using a reloadable debit card or the like; b) wherein when
the debit card carries insufficient funds to cover the purchase,
overdrawing the debit card by an overdraft amount, that being the
difference between the cost of the purchase and the funds available
in the debit card; and, c) having the user reimburse the overdraft
amount.
2. A method as defined in claim 1, wherein in step c), the user
reimburses with additional charges, such as a penalty fee or
interest.
3. A method as defined in claim 1, wherein in step a), the purchase
is conducted at a merchant, and wherein in step b), it is verified
that the merchant is authorized for overdrafts before the debit
card is overdrawn.
4. A method as defined in claim 1, wherein between steps b) and c),
the overdraft amount is deposited in a secure account.
5. A method as defined in claim 4, wherein in step a), the purchase
is conducted at a merchant, and wherein between steps b) and c),
the overdraft amount is deposited in a secure merchant account.
6. A method as defined in claim 1, wherein in step c), the user
reimburses the overdraft amount with at least one deposit made to
the debit card, with at least one amount being taken from the debit
card until the overdraft amount has been fully reimbursed,
including any additional charges, such as a penalty fee or
interest.
Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This Application claims priority on pending U.S. Provisional
Application No. 60/763,956 filed on Feb. 1, 2006, which is herein
incorporated by reference.
FIELD OF THE INVENTION
[0002] The present invention relates generally to the field of
banking and more specifically to a system and method for allowing
secured overdrafts of certain financial card accounts, namely
accounts associated with reloadable debit cards.
BACKGROUND OF THE INVENTION
[0003] With the introduction of financial tools like debit cards,
smart cards and other "stored value" cards, consumers have more
ways to access funds than ever before. Likewise, the number of
systems which can use these devices, like ATMs, debit terminals,
telephone IVR systems, and internet-based systems have likewise
multiplied in number. One of the effects of this increase in
electronic access cards and systems is a corresponding increase in
electronic funds transactions.
[0004] The present invention relates to a certain class of
financial cards, i.e. cards which permit the user only to spend the
amount of money which has been previously loaded onto the card.
Usually these financial cards are attached to an account held at
the bank which sponsors the card. "Loading" refers to the process
of remotely depositing funds into the account associated with the
card, generally via a local merchant.
[0005] Institutions holding these accounts have very little risk in
handling these transactions since by definition transactions which
would result in a negative balance are not permitted.
[0006] For instance, Risafi in U.S. Pat. No. 6,473,500 discloses
what is now recognized as a reloadable debit card. Benkert in U.S.
Pat. No. 6,796,497 discloses cards with attached subsidiary cards
which can control how the money on the card is allocated and spent.
Martin, Jr. in U.S. Pat. No. 6,304,860 discloses a system to use
the ATM network to facilitate automated debt payments.
[0007] However, there are situations where permitting such an
account to become overdrawn, i.e., carry a negative balance, would
be an extremely useful enhancement.
[0008] Therefore a need has arisen for a system which permits
certain reloadable debit card accounts to become overdrawn. However
this must be done in such a way as to eliminate any risk to the
institution holding the accounts.
SUMMARY OF THE INVENTION
[0009] As indicated above, there are situations where permitting a
reloadable account to become overdrawn, i.e., carry a negative
balance, would be an extremely useful enhancement. Therefore, it is
an aim of the present invention to provide a reloadable debit card
account, which can carry a negative balance.
[0010] Certain financial cards such as reloadable or prepaid debit
cards only allow the user to spend the amount of money they have
deposited to the account associated with the card. For the sake of
simplicity we will refer to these cards as "reloadable debit cards"
although any financial instrument, smart card, RFID or other
wireless or electronic system, purse, or wallet could be used
provided it meets the conditions of the user being able only to
spend or withdraw what has been deposited beforehand, being
reloadable, generally remotely, i.e. funds may be loaded onto the
card without having to be physically present at the institution
issuing the card; and being attached to an account at the issuing
institution.
[0011] The present invention enhances such cards by allowing them
to become overdrawn under certain circumstances, and in doing so
permits the use of these cards in a number of situations where this
was previously impossible. At the same time, these overdrawn
accounts are handled in such a way as to not increase the risk to
the institutions holding these accounts.
[0012] Companies who have a relationship with the card user and who
have made the specific arrangements with the institution sponsoring
the card, and using the method disclosed herein would be permitted
to cause said accounts to become overdrawn if there are not
sufficient funds in the account to cover a requested
withdrawal.
[0013] Therefore, in accordance with the present invention, there
is provided a method for providing overdraft funds to at least one
user, the method comprising the steps of: [0014] a) having the user
conduct a purchase using a reloadable debit card or the like;
[0015] b) wherein when the debit card carries insufficient funds to
cover the purchase, overdrawing the debit card by an overdraft
amount, that being the difference between the cost of the purchase
and the funds available in the debit card; and [0016] c) having the
user reimburse the overdraft amount.
[0017] More particularly, in step c), the user reimburses with
additional charges, such as a penalty fee or interest.
[0018] For instance, in step a), the purchase is conducted at a
merchant, and wherein in step b), it is verified that the merchant
is authorized for overdrafts before the debit card is
overdrawn.
[0019] Also, between steps b) and c), the overdraft amount can be
deposited in a secure account.
[0020] Furthermore, in step a), the purchase can be conducted at a
merchant, and between steps b) and c), the overdraft amount can be
deposited in a secure merchant account.
[0021] Moreover, in step c), the user can reimburse the overdraft
amount with at least one deposit made to the debit card, with at
least one amount being taken from the debit card until the
overdraft amount has been fully reimbursed, including any
additional charges, such as a penalty fee or interest.
BRIEF DESCRIPTION OF THE DRAWINGS
[0022] The features of the invention will become more apparent in
the following detailed description in which reference is made to
the appended drawings wherein:
[0023] FIG. 1 is a schematic representation showing the
prerequisite elements of a system in accordance with the present
invention;
[0024] FIG. 2 is a flowchart showing a transaction resulting in an
overdrawn balance on the reloadable debit card, in accordance with
the present invention; and
[0025] FIG. 3 is a flowchart shows a payment or deposit being
applied on a reloadable debit card, in accordance with the present
invention.
DESCRIPTION OF ILLUSTRATIVE EMBODIMENTS OF THE INVENTION
[0026] The present invention provides a reloadable debit card
account, which can carry a negative balance. It is noted that any
such system which proposes to allow these cards to carry a negative
balance must mitigate the risk of such an activity with the issuing
institution, wherein the institution must be typically protected
from any losses stemming from any transaction which results in the
account balance associated with the card becoming negative.
[0027] Permitting accounts associated with certain reloadable debit
cards to become overdrawn allows a class of transactions not
currently associated with these card accounts, such as periodic or
recurring payments for goods and services, or the ability to make
and manage small loans. This assumes an existing relationship
between the card user and the company whose payment request causes
the account to become overdrawn.
[0028] Likewise, consumers could repay indebtedness simply and
easily by making deposits, i.e. loading payments, onto the
financial card in question. Because this reloading process is
becoming widely available at many local merchants, it is in many
cases much easier and more convenient for consumers to repay
indebtedness in this manner as opposed to the more common method of
the company mailing a bill and the user paying with a check or
money-order by return mail. This is especially true for those users
who may have limited or no access to standard banks or checking
accounts.
[0029] However it is noted that, since these cards are not designed
to allow overdrafts (in fact, they are designed not to allow
overdrafts), the only overdrafts that would be permitted require
specific prior arrangements between the company whose payment would
cause the account to become overdrawn and the institution holding
the card account.
[0030] Now turning to a more detailed description of the present
invention, it is noted that the transactions described herein may
be performed via a telephone IVR system, over the Internet or via
in any other suitable communication means, but for this
illustrative example, we will use Automated Clearinghouse (ACH)
transactions.
[0031] Referring therefore to FIG. 1, we have a merchant 101, a
user 102, a reloadable debit card 103, an ATM network connection
104, an ATM host processor 105, a financial institution 106, and a
number of accounts at this institution, e.g. a merchant account
107, a secured merchant overdraft account 108, and a reloadable
debit card account 109.
[0032] First, the merchant 107 needs an agreement with the
institution holding the reloadable debit card accounts 106. In this
embodiment, the merchant will have an account 107 with the
institution as well as a secured merchant overdraft account 108,
although equivalent transactions could be performed even if the
merchant kept its accounts at other banks.
[0033] The secured merchant overdraft account is the mechanism
which protects the institution against any losses. This account is
held jointly by the bank and the merchant and its purpose is to
typically provide a 100% guarantee for the institution against
loss. Any payments withdrawn from a debit card account whose
balance is at or below zero are deposited into the secured merchant
account. The merchant may not withdraw funds from this account; its
only purpose is to act as security against the overdrawn debit card
accounts. Of course, there are other alternatives which could
provide equivalent securitization such as the freezing of funds in
the merchant account 107 equivalent to the total overdraft amounts,
or the merchant providing other well-known means of securitization
including sufficient collateral to offset any overdrafts.
[0034] Next, the user 102 enters into a contractual agreement with
the merchant 101. This agreement is usually for the purchase of an
item or a small loan. In general, the user 102 receives something
of value immediately in return for an agreement to pay for this
item with one or more future payments plus fees and interest if
applicable.
[0035] Then user 102 either already has, or is provided with,
possibly by the merchant 101 itself, a reloadable debit card 103.
The user 102 agrees to make payments for the item of value via one
or more future ACH transactions against this reloadable debit card
103. In the case where the user 102 receives a small loan, the
money lent could even be delivered to the user by loading it onto
the debit card in question.
[0036] Referring now to FIG. 2, we will attempt to process a
previously authorized ACH payment transaction 201 against the
reloadable debit card account 103. Note that the payment
transaction does not necessarily have to be an ACH transaction, but
could be any request for payment submitted to the institution
holding the debit card account, by any means.
[0037] First, at 202, the process verifies if there are sufficient
funds on the debit card to process the payment. If so we just pay
the merchant 101 by transferring. At 203, funds from the debit
account 109 to the merchant account 107.
[0038] Now if the funds are insufficient, there is a need to
overdraw the account. The next step, at 204, is to determine
whether the merchant 101 is authorized to cause the account to
become overdrawn. If not, a report is issued at 208 that the
transaction has failed, and the transaction ends at 210.
[0039] If the merchant 101 is authorized to cause the account to
become overdrawn, it is determined at 205 if there is any money in
the debit card account that can be used. If there is, the remaining
funds are transferred in step 206 from the debit card account 109
to the merchant account 107, and the amount remaining to pay is
reduced by this amount.
[0040] The amount left to be paid must be handled by causing the
account to become overdrawn, whereby the process then verifies at
207 whether this amount is greater than the overdraft limit. If so,
a report issued at 208 that the transaction has failed 208, and the
transaction ends at 210.
[0041] Otherwise, in step 209, the payment amount is transferred
out of the debit card account 109 and into the secured merchant
overdraft account 108.
[0042] Note that it is entirely possible for multiple merchants to
cause the debit account to become overdrawn provided they have been
previously authorized to do so.
[0043] Referring now to FIG. 3, a payment loaded onto the
reloadable debit card 109 will now be processed via the ACH system.
Note that this deposit does not necessarily have to be an ACH
transaction, but could be any deposit submitted to the institution
holding the debit card account, by any means.
[0044] First, in step 302, the process verifies if the debit card
103 is overdrawn. If it is not, the funds are deposited at 307 to
the debit card account 109 and the transaction is complete at
308.
[0045] If the debit card 103 is overdrawn, the process then checks
at 303 if the deposit amount is greater than the overdraft. If it
is, then, at 304, the payment due is equal to the overdraft amount.
Otherwise, the payment is equal to the deposit amount, at 305.
[0046] Now, the funds (i.e. the "payment" established in the
appropriate one of the above steps 304 and 305) can be effectively
released in step 306 to the merchant by transferring the "payment"
amount from the secured merchant overdraft account 108 to the
merchant account 107. Of course, if alternate means were used to
secure the overdrafts, then the alternate securitization and or
collateral could be reduced by the payment amount, if desired or
practicable.
[0047] Finally, the funds are deposited at 307 to the debit card
account and the transaction is finished at 308.
[0048] Note that since multiple merchants might be authorized to
overdraw the account, and may have requested payments that have
caused the account to become overdrawn (or more overdrawn),
applying payments to multiple merchants requires a predetermined
method be in place. For instance, a merchant may have priority and
be repaid first, or a payment might be allocated proportionally by
merchant, or perhaps simply the oldest overdraft would be repaid
first. This needs to be determined before allowing multiple
merchants to overdraw the account.
[0049] Although the invention has been described with reference to
certain specific embodiments, various modifications thereof will be
apparent to those skilled in the art without departing from the
spirit and scope of the invention. The entire disclosures of all
references recited above are incorporated herein by reference.
* * * * *