Revolving Credit Solutions

Overview

Lithic's credit infrastructure enables you to launch consumer and commercial revolving credit card programs with full control over interest rates, fees, billing cycles, and payment terms. Whether you're building a traditional credit card, a store card, or an embedded credit product, Lithic provides the core ledger and card issuing capabilities you need.

Revolving credit allows cardholders to carry balances from one billing period to the next, paying interest on outstanding amounts. Lithic handles the complex mechanics of interest calculation, statement generation, minimum payments, and grace periods, while giving you flexibility to configure terms that match your product and risk tolerance.

Key Features for Revolving Credit

Flexible Rate Structures

Support diverse credit products with multiple interest rate options:

Tiered Pricing: Different APRs based on credit score bands (prime, near-prime, subprime)
Promotional Rates: 0% intro APR for 6-18 months, then standard rate
Penalty Pricing: Increased APR triggered by missed payments or other events
Transaction-Based Rates: Different rates for purchases, cash advances, and balance transfers
Variable Rates: Prime-linked rates that adjust automatically with prime rate changes

Comprehensive Fee Management

Lithic automatically assesses core fees based on customer behavior:

Late payment fees with maximum occurrences per cycle (automated)
Returned payment fees for ACH failures (automated)
Foreign transaction fees calculated on non-USD transactions (automated)
Annual membership fees with waiver options (automated)

Implement additional fees via management operations API:

Cash advance fees (greater of fixed amount or percentage)
Over-limit fees (if opt-in allows)
Custom fees specific to your product

Regulatory Compliance

Built-in compliance with credit card regulations:

Reg Z Statements: Required disclosures, APR calculations, payment allocation
CARD Act Compliance: Payment application order, fee limitations, rate change notices
Truth in Lending: APR calculations, finance charge disclosures
Fair Credit Billing Act: Dispute rights, billing error resolution
Minimum Payment Warnings: Required warnings about interest costs

Advanced Payment Features

Payment Allocation: Payments applied in compliant order:

Fees (late fees, returned payment fees, etc.)
Interest charges (oldest to newest)
Principal balances (highest APR to lowest APR)

Payment Scheduling: Support for future-dated payments and recurring payments.

Payment Source Options:

ACH pull from external bank account

Grace Period Management

Intelligent grace period tracking:

Grace applies to new purchases if prior balance paid in full
Grace revoked if carrying balance from prior statement
Separate grace tracking for promotional rate categories
Customer-visible grace status in statements and account details

Credit Line Management

Dynamic credit line adjustments:

API-driven credit limit increases/decreases
Temporary credit line increases for specific periods
Automatic limit reductions based on delinquency
Credit line reinstatement after paydown

Statement & Reporting

Comprehensive financial reporting:

Monthly statements with transaction detail
Year-end interest and fee summaries (for tax reporting)
Payment history and on-time payment tracking
Credit utilization reporting
Transaction categorization for budgeting

Core Capabilities

Credit Product Configuration

Revolving Credit Accounts: Enable customers to carry balances with flexible repayment:

Credit Limits: Business-level exposure caps and card-level limits
Interest Rate Categories: Multiple rate types for different transaction and balance types:
- Purchase rates (standard transaction APR)
- Promotional rates (introductory or special offers)
- Cash advance rates (ATM withdrawals and cash equivalents)
- Penalty rates (triggered by late payments or other events)
- Balance transfer rates (transfers from other credit products)
Tiered APRs: Different rates and fees for customer segments based on creditworthiness
Custom APRs: Select your exact preferred rate per Financial Account:
Prime Rate Linking: Automatic rate adjustments tied to prime rate changes
Interest Caps: Regulatory compliance for maximum interest rates
Custom Minimum Payment: Control the balance categories that go into your customers’ minimum payments

Billing Cycles: Configure how and when statements are generated:

Fixed Calendar Billing: Statement close on specific day each month (e.g., 25th of every month)
Rolling Billing: Statement close based on days from enrollment (e.g., every 30 days from account opening)
Configurable Cycle Length: Support for monthly, bi-monthly, or custom periods
Statement Dates: Close date, due date, and grace period configuration

Grace Periods: Interest-free periods for new purchases:

Configurable grace period length (up to billing cycle length)
Grace period revoked if previous balance not paid in full
Separate grace period tracking for different rate categories

Interest Calculation & Accrual

Lithic handles complex interest calculations using industry-standard methods:

Average Daily Balance Method:

Daily balance tracking throughout billing cycle
Interest accrued daily based on average balance
Separate calculations for each rate category (purchases, cash advances, etc.)
Proper handling of payments, credits, and new charges

Interest Posting:

Interest added to statement balance at cycle close
Interest on interest (compound interest) configurable
Interest rounds to nearest cent (or configurable)
Minimum interest charges (e.g., $1 minimum if any interest due)

Payoff Disclosure Calculations:

Automatically calculated 36 month repayment and Time-to-Pay-Off with minimum payment
Let Lithic handle support for consumer Reg Z disclosures

Retroactive Interest Calculations:

Automatically recalculated interest from previous periods if necessary
Let Lithic handle support for MLA and SCRA

Statement Generation

Reg Z-Compliant Statements: Automatic generation of credit card statements with required disclosures:

Opening and closing balances
All transactions during billing cycle (purchases, payments, fees, interest)
Interest charges by transaction category
Minimum payment required
Payment due date and grace period information
Year-to-date totals (interest paid, fees paid)
Annual Percentage Rate (APR) disclosures
Payment allocation disclosures

Immutable Transaction Records: All statement data is permanent and auditable for regulatory compliance.

Payment Processing

Flexible Payment Options:

Minimum Payment: Calculated based on balance percentage + fees + interest
Statement Balance: Pay full statement amount to maintain grace period
Current Balance: Pay all outstanding charges including recent transactions
Custom Amount: Pay any amount above minimum payment

Payment Application:

Payments applied in regulatory-compliant order ~~(fees, interest, principal)~~
- in order of highest → lowest interest rate
Separate tracking for different balance types (purchases vs. cash advances)
ACH payment processing

Auto-Collection: Configurable automatic payment collection via ACH:

Pull minimum payment, statement balance, or custom amount
Scheduled collection after due date
Retry logic for failed payments
Customer opt-in/opt-out capabilities

Fees & Penalties

Lithic-Automated Fees:

Lithic automatically assesses the following fees based on your credit product configuration:

Late Payment Fees: Automatically triggered when minimum payment not received by due date
Returned Payment Fees: Automatically applied when payment ACH returns (NSF, account closed, etc.)
Foreign Transaction Fees: Percentage of transaction amount for non-USD transactions
Annual Fees: Recurring yearly fee for card membership

Customer-Implemented Fees:

These fees are not automatically assessed by Lithic. You can implement them using the Management Operations API:

Cash Advance Fees: Fixed or percentage fee for ATM withdrawals and cash-equivalent transactions
Over-Limit Fees: Charged when card balance exceeds credit limit (if allowed)
Statement Copy Fees: Fee for requesting paper statements or copies
Custom Fees: Any additional fees specific to your credit product

Example - Posting a cash advance fee:

POST /v1/management_operations
{
  "category": "MANAGEMENT_FEE",
  "event_type": "MONTHLY",
  "subtype": "CASH_ADVANCE_FEE",
  "financial_account_token": "b68b7424-aa69-4cbc-a946-30d90181b621",
  "amount": 500,  // $5.00 fee
  "direction": "DEBIT",
  "effective_date": "2024-01-15",
  "memo": "Cash advance fee for ATM withdrawal"
}

Fee Configuration:

Configure automated fees with your credit product setup (contact Lithic)
Fixed amounts or percentage-based fees
Maximum fee occurrences per billing cycle
Fee waiver rules for customer segments
Regulatory caps on fee amounts

All fees (automated or manual) can be reversed as desired using management operations

Credit Limit Management

Multi-Level Limits:

Business-Level Limits: Total exposure cap across all credit accounts
Card-Level Limits: Individual credit line for each cardholder
Shared Limits: Multiple cards drawing from same credit line (employee cards)
Credit Line Increases: API-driven credit limit adjustments
Over-Limit Transactions: Configurable approval/decline behavior

Dynamic Limit Validation: Real-time authorization decisions based on:

Current outstanding balance
Pending authorizations
Available credit line
Program-level reserve and receivables accounts

Transaction Authorization

Credit-Specific Authorization Controls:

Available Credit Checks: Real-time validation against credit limit and outstanding balance
Authorization Holds: Pending transactions reduce available credit until settlement
Overlimit Behavior: Configure whether to approve or decline transactions exceeding limit
Authorization Amount: Includes merchant authorization amount plus network fees

Integration with Authorization Rules:

Conditional blocking (MCC restrictions, country blocks, etc.)
Velocity limits (daily, monthly transaction counts and amounts)
Challenge authentication for suspicious transactions
Real-time decisioning via Authorization Stream Access

Balance Tracking

Credit Account Balances (tracked as negative balances):

available_amount: Total amount fully spent and settled (absolute value is amount owed)
pending_amount: Amount in authorization holds not yet settled
total_amount: Combined amount owed (available + pending)
available_credit: Credit limit minus total amount (spendable amount remaining)

Balance Components:

Principal balances by rate category (purchases, cash advances, balance transfers)
Interest balances (accrued but not yet billed, billed but not paid)
Fee balances (assessed fees not yet paid)
Payment credits (payments received but not yet applied)

Implementation

Ready to build? Start with the Commercial Revolving Credit Cards guide for an overview of program structure, key parties, and how revolving credit works at Lithic.

Use Cases

Consumer Credit Cards: General purpose credit cards for everyday spending with rewards, cashback, or points programs.

Store Credit Cards: Private label cards for specific retailers with special financing offers (0% APR for 6-12 months on large purchases).

Secured Credit Cards: Credit-building products where customer deposits collateral equal to credit limit, with graduation to unsecured after demonstrated payment history.

Small Business Credit Cards: Commercial credit cards for small business owners with higher limits and business-specific rewards.

Embedded Lending: Add "buy now, pay later" or installment loan features to existing products with revolving credit lines.

Co-Branded Cards: Partner with brands to offer credit cards with brand-specific benefits and rewards tied to credit line usage.