Registers – Systems controlled by data bearing records – Banking systems
Reexamination Certificate
1999-07-30
2002-05-14
Frech, Karl D. (Department: 2876)
Registers
Systems controlled by data bearing records
Banking systems
C235S375000
Reexamination Certificate
active
06386444
ABSTRACT:
FIELD OF THE INVENTION
The present invention relates generally to a system and method for providing a credit instrument that is associated with insurance providers so that cardholders receive rebates based on card usage which can be applied to insurance premiums.
BACKGROUND OF THE INVENTION
It is increasingly common that consumers pay for many of their products and services using credit cards, charge cards, debit cards, bankcards and like instruments rather than using cash or checks. Consumers do this because they find it more convenient than sending or using cash or checks. Credit cards present unique advantages insofar as they provide a revolving line of credit that can be accessed when personal funds are low. Consumers are inclined to use credit cards versus other means for purchases because itemized reports of transactions (citing amounts and merchant names) are generated each month. This is useful for monitoring one's spending habits, detecting fraud or errors, disputing charges, proving purchase when returning items without a conventional receipt, and providing expense records for end-of-year tax purposes.
In fact, in today's so-called “plastic economy” it is increasingly common that consumers use the credit card as a first, rather than last, resort. Many consumers use credit cards for most non-trivial transactions, taking advantage of the 20-25 day interest-free grace period and paying their balances off each month, sometimes thousands of dollars. At the other end of the spectrum, many consumers who have expenses that exceed their monthly income on a regular basis use the available revolving credit to manage their spending flow. In sum, there is a large body of credit cardholders in modern society who engage in a significant volume of transactions on a regular, continuous basis.
The modem plastic economy greatly benefits merchants and service providers because the convenience and instant credit access lead to greatly increased sales. They also benefit the card issuer (issuing bank) because for each transaction an “interchange” fee (typically 1-4%) administered by the card associations (Visa® and Mastercard®) is distributed to the issuer (deducted from the overall transaction amount). Moreover, the card issuer benefits from the elevated interest payments made by consumers carrying a balance. Therefore, in the card issuer/merchant/customer model of the credit card system, the card issuers and merchants receive substantial benefits.
Consumers tend to use their conventional credit cards for certain types of purchases, such as retail transactions in shopping malls, groceries at foodstores, dinner at restaurants, airline tickets and so forth. The credit card's attributes make it well-suited for use in such transactions and the average consumer is likely to reach for his/her credit card rather than for cash in such circumstances due to convenience.
Consumers do not tend to use credit cards as frequently for “service industry” payments—often recurring charges—such as those for insurance companies, cable television providers and utilities. This is because the “convenience factor” associated with paying a recurring charge (such as an insurance premium) by credit card is somewhat attenuated compared to other transactions where credit cards exhibit a clear advantage over checks or cash. Merchants such as these have been reluctant to offer the card payment option due to concerns about paying interchange fees—not recognizing the benefits in higher tickets and improved collection rates. In general, then, while more and more consumers are using credits cards for their purchases, this tends not to be the case with insurance premiums. As a practical matter, insurance companies, which in all other respects are well-capitalized and critical players in the national economy, are a conspicuously absent beneficiary from the issuer/merchant/customer credit card relationship. Moreover, there is no other mechanism for loyalty- or affinity- building for insurance companies that is based on the consumer's credit or debit card. These are significant disadvantages.
Some card issuers have sought to employ rebates in order to increase use of credit cards. Credit card rebate systems, such as the Discover® card or the like, can provide a rebate tied to general card usage. The entire benefit (a rebate) is enjoyed by the consumer who receives a check or credit. However, such credit card rebate systems provide no particular benefits to insurance companies. There is no loyalty-building to encourage cardholders to maintain insurance accounts or open new ones. Moreover, because the rebate is sent directly to the consumer, who can spend it as he/she pleases, there is no mechanism to channel funds back to insurance companies to expand business and cross-sell. This is a lost opportunity and significant disadvantage.
Other problems and drawbacks also exist with traditional credit card and debit card instruments and rebate programs.
SUMMARY OF THE INVENTION
Accordingly, it is one object of the present invention to overcome one or more of the aforementioned and other limitations of existing systems and methods for the use of credit card and debit card instruments.
What is desired is a system and method of providing a credit or debit card system that provides rebates based on card usage that can be applied to bills for an insurance policy so that cardholders share in the financial benefits of card usage.
It is another object of the invention to provide such a credit instrument whereby such a rebate program encourages cardholders to remain loyal to the insurance company by maintaining accounts and opening new accounts.
It is another object of the invention to provide a credit instrument whereby a predetermined percentage of consumer credit card spending is rebated so as to encourage customer loyalty to the card issuer.
It is another object of the invention to provide a credit instrument whereby a predetermined percentage of consumer credit card spending is applied to payments due on an insurance account of the cardholder so as to encourage card use and thereby increase card issuer income.
It is another object of the invention to provide a credit instrument whereby a predetermined percentage of consumer credit card spending is applied to an insurance provider so as to encourage customers to maintain their account with the card issuer because the card usage rebates are paid on a periodic basis.
It is another object of the invention to provide such a credit instrument where the card issuer and the insurance concerns share the costs of the rebate program so that a significant rebate can be provided without imposing excessive costs on the card issuer.
To achieve these and other objects of the present invention, and in accordance with the purpose of the invention, as embodied and broadly described, an embodiment of the present invention comprises an apparatus and method for a credit instrument providing that a percentage of consumer spending is rebated to the consumer “earmarked” for payment of insurance premiums or the like for an account with an insurance company. In one version, an applicant provides the card issuers a benefiting account number to which the rebate is credited at the insurance provider based on the rebate amount. The rebate is automatically applied to the insurance account and, depending on the size of the rebate and premium that is due, the cardholder may receive a bill (paper or electronic) reflecting a reduced premium or even a credit from the insurance concern. In another version, the rebate is submitted as a two-party check which can be cashed by the consumer or submitted by the consumer to the insurance company along with a personal “co-payment” for any remaining balance due. The card itself may carry the name of the insurance company on the card face or backing.
This system (which may be referred to the Insurance Accelerator™) is advantageous in a number of respects. It is beneficial to card issuers because it encourages card use, creation of new accounts, and maintenance of ex
First USA Bank, N.A.
Frech Karl D.
Hunton & Williams
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