Abstract:
A computer-implemented method for facilitating electronic funds transactions is disclosed. According to one embodiment, the method may comprise the steps of: issuing a transaction card to a cardholder by associating the transaction card with a demand deposit account from which the cardholder is authorized to electronically disburse funds; receiving an authorization request for an attempted transaction between a merchant and the cardholder, the authorization request containing information associated with the transaction card and the attempted transaction; processing the authorization request based on one or more predetermined business rules; authorizing the transaction without immediately settling the transaction against the demand deposit account of the cardholder; and settling the transaction, at a time subsequent to the execution of the transaction, through automated clearing house (ACH) from funds retained within the demand deposit account of the cardholder.

Description:
FIELD OF THE INVENTION 
     The invention relates generally to electronic commerce, and more particularly to a linked account that allows cardholders to apply funds in a cash demand deposit account or other account to transactions with a credit card, in a manner which allows these transactions to be automatically reconciled against the cash account on a daily or other basis. 
     BACKGROUND OF THE INVENTION 
     The consumer credit industry has played a significant role in electronic and other commerce. Millions of Americans use traditional bank-sponsored credit cards, private merchant sponsored cards, debit cards, stored value cards, combinations of those instruments and other accounts for retail, Internet and other purposes. Credit cards in particular offer conveniences and advantages, successfully attracting consumers who wish to simplify their shopping experience by leaving their cash and checkbooks behind. Rewards programs also enhance credit card usage. 
     Despite the convenience of credit cards, many individuals may prefer to avoid using them. For example, some individuals may be reluctant to use credit cards because they are averse to outstanding account balances, and wish to avoid interest charges on their purchases. Other consumers may prefer to avoid the temptation of purchasing power in excess of their immediate ability to pay. Yet other consumers may desire credit access, but are denied that access due to past credit history. 
     For these and other reasons, cash accounts such as bank debit cards have emerged to service consumer needs. A debit card is a card that may be linked to a consumer&#39;s cash account, such as a demand deposit account (DDA), typically a checking account. When the consumer wishes to make a purchase from a merchant, the debit card is swiped at the point of sale as a credit card would be, except the funds used to pay the merchant are deducted from the cardholders checking account rather than paid from a third party credit network. The need to carry a checkbook is eliminated, while concerns regarding credit cards are avoided. 
     There are, however, disadvantages to debit cards as a payment instrument. First, not all banks offer debit cards. This forces potential debit card users to open accounts elsewhere if their banks do not offer this service. Second, a consumer may not have time to keep track of precise balances on their cash account, so that the cash balance on the debit card or other instrument may be used up unknowingly. 
     Thus, some debit cards offer overdraft protection in the form of a secondary line of credit. A checking account accessible with a debit card, for example, may be backed by a credit line for use in the event that there are insufficient funds in the checking account to cover a purchase. 
     Once a person has exceeded their available cash balance and invoked the credit line, they can continue to make purchases until they have maxed out this secondary credit line. This may occur without the consumer becoming aware of that status until the limit is reached, when repayment may be more difficult. 
     Further, in some instances, debit card users may not be offered the same type of rewards that credit card users are eligible for. 
     A need therefore exists for a versatile financial instrument that permits consumers to make purchases with the funds being drawn from a desired demand deposit account held at any financial institution. 
     Additionally, a need exists for consumers to have a more controlled access to an overdraft credit line. 
     A need also exists for an instrument that will attract reluctant consumers by offering them the ability to make purchases by drawing funds from a demand deposit account, while earning points or credits toward various rewards. Other problems exist. 
     SUMMARY OF THE INVENTION 
     The invention solving these and other problems relates to a system and method for a linked account having a sweep feature, enabling individuals to purchase goods and services from a merchant using a cash account backed by a credit account, but with overdrafts being reconciled automatically on a daily or other basis. 
     According to one embodiment of the invention, a user may receive a linked account instrument that is linked to a cash account, such as a demand deposit account (DDA) already held by the user. The consumer may be assigned a predetermined cumulative limit or maximum daily “open to buy” amount that limits the dollar amount of goods and services that may be purchased against that account, which limit may be independent of the actual cash balance in the account. Purchases can be made by swiping the instrument (for example, an encoded card) at a merchant point of sale (P.O.S.) terminal or other site. The merchant may receive an instantaneous authorization decision from an authorization server via a processing network. 
     At a predetermined time each day, transactions made using the linked account card may first be processed against the user&#39;s designated cash account. The cash account may be examined to determine whether there are sufficient funds to satisfy the charges incurred by the cardholder that day. 
     If sufficient funds are found in the cash account, the aggregate transaction amount may be withdrawn from that account and deducted against the sweep card&#39;s daily “open to buy” amount. 
     If the cash account does not have sufficient funds to cover the aggregate transaction amount, the cardholder&#39;s ability to make additional purchases may be suspended. In this case, any transactions causing the aggregate transaction amount to exceed the cash account balance may be processed as a credit charge against a linked credit account, in overdraft fashion. 
     After the placing of the overdraft on the credit account, a check or sweep may be automatically made against the cash account at 12:01 a.m. the next day or other later time to check for sufficient funds to cover the extended overdraft credit. If sufficient cash account funds are present at the time of a subsequent sweep, the funds may be withdrawn from the cash account and the charge on the credit account may be cleared. The cardholder may be charged a fee for the use of the credit account. 
     If the first sweep of the cash account does not find sufficient funds to satisfy the outstanding overdraft amount on the credit account, the linked account card privileges may remain suspended and interest charges may accrue on the outstanding credit card balance until satisfaction is made. 
     One advantage of the invention is the ability of a cardholder to set up a cash account of their choice to make purchases, and have the funds withdrawn from one or more of demand deposit or other accounts, regardless of the institution holding the account. This allows consumers to benefit from card purchases even if their bank does not offer traditional debit-card services. 
     Another advantage of the invention is the flexibility of the collateral credit account. The consumer may use an existing credit account, open a credit account with the institution issuing the linked account card, or set up another type of account to supply the overdraft protection. 
     Yet another advantage of the invention is the ability to perform a series of automatic sweeps of the cash account in search of adequate funds. If adequate funds become available during one of the subsequent sweeps, they may be withdrawn from the cash account and the credit account may be cleared at the earliest possible opportunity. This provides advantages over a traditional debit card account, where a cardholder may have to pay off the overdraft by visiting the bank or mailing a check to the bank. 
     Conversely, regardless of the constituent accounts, the institution issuing the linked account card is presented with several options for handling necessary overdrafts. Based on past credit history, for example, a cardholder may be given the privilege of continuing to draw from the available line of credit without having the card privileges suspended. If a cardholder&#39;s credit history does not indicate such a feature, or if the consumer declines such a feature, the issuing institution may constrain the cardholder by suspending card privileges if a predetermined number of sweeps do not find adequate funds in the cash account. 
     Additional features and advantages of the invention will be apparent from the description that follows, or may be learned by practice of the invention. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
       The invention will be described with respect to the accompanying drawings, in which like elements are referenced with like numbers. 
         FIG. 1  is a schematic diagram of a system supporting a linked account card according to an embodiment of the invention. 
         FIG. 2  is a flowchart which illustrates the establishment of a linked account card account according to an embodiment of the invention. 
         FIG. 3  is a flowchart which illustrates a process of authorizing transactions made with a linked account card according to an embodiment of the invention. 
         FIG. 4   a  is a flowchart illustrating the settlement of transactions initiated through use of a linked account card, according to an embodiment of the invention. 
         FIG. 4   b  is a graphical representation of one example of the settlement of transactions initiated through use of a linked account card, according to an embodiment of the invention. 
         FIG. 4   c  is a graphical representation of one example of the settlement of transactions initiated through use of a linked account card, according to an embodiment of the invention. 
         FIG. 5  is a flowchart illustrating overall processing according to the invention, in another regard. 
     
    
    
     DETAILED DESCRIPTION OF PREFERRED EMBODIMENTS 
       FIG. 1  illustrates a schematic overview of various components of a transaction architecture supporting the use of a linked account according to the invention. A linked account instrument (not shown, for instance a magnetically encoded plastic card similar to a credit card or ATM card) may be provided to consumers to access funds in an existing cash account  160  such as a DDA held at a financial institution, such as a bank or savings and loan, or other institution. 
     Transactions may be initiated by swiping the linked account card at a point of sale (P.O.S.) terminal  110  when purchasing goods and/or services from merchants, or via other mechanisms such as telephone or Internet remote authorizations against the linked account card. 
     The merchant seeks authorization for each transaction from an authorization server  130  through a processing network  120 , such as through the VISA™, MASTERCARD™ or other network which may adapted for transaction processing against a debit card or other cash account. 
     The authorization server  130  may be maintained by the institution that issues the linked account card and may include an account information database, an account balance database, and/or a transaction history database and other components. The authorization server  130  may be provided with a first interface  136  to the cash account  160 , and a second interface  138  to the credit account  140 . Transactions made using the linked account card may be first processed against the cash account  160  designated by the cardholder, via an automated clearing house (ACH)  150 . If the cash account  160  does not contain adequate funds and the authorization is rejected, the authorization server may temporarily suspend use of the card and process the transactions as a credit charge against a credit account  140 . This credit account may also be designated by the cardholder, and act as an overdraft account protecting the cash account  160 . 
     One or more sweeps against the cash account may be automatically performed at a later time to check for sufficient funds to satisfy the overdraft amount charged to the credit account  140 . If sufficient funds are present in the cash account  160  at the time of a subsequent sweep, the funds may be withdrawn and applied to the credit account  140  to clear that account. The consumer may incur a fee for the use of the credit account  140 . If subsequent sweeps of the cash account do not find sufficient funds, the linked account card privileges may remain suspended and the cardholder faces accumulating interest charges on the outstanding credit card balance. 
     The account transaction system according to the invention in one regard will be described in additional detail below. 
     Setting Up the Account 
       FIG. 2  illustrates steps that may be followed when establishing a linked account card account according to one embodiment of the invention. Potential linked account cardholders may be identified through known marketing solicitation techniques, illustrated at step  210 . These potential cardholders, or applicants, may be required to complete an application in step  220  requesting information pertaining to their financial history. 
     In step  230 , the potential cardholder&#39;s application may then processed by the institution that issues the linked account card. This results in a determination of the applicant&#39;s eligibility to receive a linked account card. Credit decisioning may be handled through known services, such as the Magnum™ engine or the like. If a negative decision is made, in step  240  the applicant may be denied a linked account card. If the applicant is approved, at least two additional pieces of information may be required. 
     First, as illustrated in step  250 , a potential cardholder may be asked to designate a demand deposit account (DDA) or other backing account that will provide the cash funds for purchases made with the linked account card. The designated cash account may be a checking account, a savings account or other account held at a bank or other institution. In an alternative embodiment discussed below, more than one cash account may be selected to provide the cash or cash equivalent for transaction processing. 
     A second item that a potential cardholder may be required to provide in step  250  is a designated credit or other account to handle overdrafts. This may be an existing credit card or other account. If the linked account cardholder does not already have an existing credit account, one may be established through the institution that is issuing the linked account card. Once these accounts have been identified, they may be verified before the linked account card account is established in step  260 . 
     Finally, in step  270  the linked account card itself may be mailed to the new cardholder along with the materials explaining the nature of the account. Upon receiving these materials, the cardholder may call a voice response unit (VRU) or other facility to activate the card, as illustrated in step  280 . 
     The linked account card provided to the cardholder may bear a VISA™, MASTERCARD™ or other acceptance mark. The linked account card may have a daily spending limit, which may be referred to as an “open to buy” amount. This means that, on any given day, the cardholder will only be able to purchase goods and services up to that dollar amount, regardless of the cardholder&#39;s cash balance. 
     This daily spending limit or “open to buy” amount may be determined by the credit history information received during processing of the cardholder&#39;s application or otherwise. The daily spending limit may also be monitored on a daily basis by the authorization server  130  maintained by the card-issuing institution. 
     Authorizing Transactions 
       FIG. 3  illustrates a process of authorizing purchases that the cardholder wishes to make using the linked account card according to an embodiment of the invention. 
     In step  310 , the cardholder may present the linked account card to the merchant. In step  316 , the merchant may request authorization from an authorization server through a processing network, such as the VISA™, MASTERCARD™, or other network. The authorization server  130  determines in step  340  whether the transaction may be authorized. This determination may depend in part on whether the cardholder&#39;s daily cumulative spending limit or “open to buy” amount has been reached. 
     If it has, the authorization server  130  may not authorize the transaction. If the daily spending limit has not been reached, the authorization server  130  may authorize the transaction. The authorization server  130  may also process authorizations against this “open to buy” amount using business rules established by the institution issuing the linked account card, along with other financial rules. 
     If the transaction is not authorized, in step  380  the merchant may be notified and the cardholder may abandon the purchase or select another form of payment, as illustrated in step  390 . 
     If the transaction is authorized, in step  350  the authorization server  130  may keep a record of what amount of the daily spending limit has been used by the purchase. In step  360 , the merchant may be notified that the transaction has been authorized, allowing the cardholder to receive the goods or services purchased in step  370 . 
     If the cardholder wishes to make another purchase using the linked account card, the process may be re-entered at step  310 . Otherwise, the process flow illustrated in  FIG. 3  may end at step  376 . 
     Settling Transactions 
     Subsequent to the completion of an authorized transaction, the merchant may issue a settlement request, as illustrated by step  402  in  FIG. 4   a . Such a request may be sent to the merchant&#39;s sponsoring bank or financial institution, through a processing network  404 , such as the VISA™, MASTERCARD™, or other network which may be adapted for transaction processing against a debit card or other cash account. At step  406 , the merchant&#39;s sponsoring bank or financial institution may pay the merchant, while simultaneously sending a request for payment to the institution  408  that issued the linked account card. As illustrated in step  410 , the card-issuing institution  408  may then settle with the merchant&#39;s sponsoring bank or financial institution through an automated clearing house (ACH), as appreciated by persons skilled in the art. 
     Aside from settlement with the merchant&#39;s sponsoring bank, the card-issuing institution  408  has to settle with the cardholder. For each transaction initiated with the linked account card, individual automated clearing house debits may be generated which contain the unique merchant identification in the descriptor field such that the merchant identification appears on the cardholder&#39;s cash account statement. 
     At a predetermined time, such as at, near or just after the end of each day, the cardholder&#39;s designated cash account may be swept via an automated clearing house to determine whether adequate funds exist to cover all of the day&#39;s charges accumulated through use of the linked account card. This is illustrated in step  412 . At step  414 , an inquiry may be made to determine whether the designated cash account has sufficient funds to cover all of the individual debits that were generated by the authorization server  130  in response to the charges accumulated using the linked account card. 
     If adequate funds are present in the cardholder&#39;s designated cash account  160  at the time of reconciliation, the funds may be withdrawn from the cash account  160  in step  418  and the authorization server  130  may reset the daily spending limit to its full amount in step  422  for the following day. 
     If the designated cash account  160  does not have sufficient funds to cover the purchases at the time of the sweep, the authorization server  130  may draw the funds from the available credit on the credit account  140  that was designated by the cardholder as illustrated in step  426 . 
     At this point, the authorization server  130  may be configured to temporarily suspend the cardholder&#39;s ability to make further purchases with the linked account card, in step  430 . Step  430  will occur regardless of whether the daily spending limit or “open to buy” amount has been reached. 
     It may be noted that there are different variations possible when determining how the accumulated daily transactions will be added up and applied against the designated cash account  160 . 
     In one embodiment, a FIFO (first-in, first-out) system may be used, wherein the daily charges will be applied against the cash account  160  in the order in which they were made. As soon as a debit is found that cannot be drawn from the cash account  160  due to insufficient funds, the credit account  140  may be applied to cover that particular charge, as well as any remaining charges up to a credit limit of that account. 
     Additionally, in another embodiment the sequence of daily charges may be applied against the cash account  160  based on the relative size of the transaction amount. For example, all of the smaller charges may be drawn against the cash account  160  first, leaving only the remaining larger charges that cannot be satisfied to be covered via the credit account  140 . Conversely, the larger purchases may be drawn against the cash account  160  first, leaving only the smaller charges to be covered by the credit account  140  when funds in the cash account  160  become insufficient. 
     Another embodiment may be employed when the cash account  160  can only handle a percentage of a particular charge. For example, assume that charges are being applied against the cash account  160  during a sweep. If the cash account  160  reaches a point at which it can only cover a certain percentage of a charge being applied against it, the system may be configured to have the cash account  160  cover whatever percentage of the charge it can, only sending the shortfall to the credit account  140 . Or, the system may be configured to have the entire charge be covered by the credit account  140 . 
     According to the invention, and as seen in step  434 , the cash account  160  may be swept again at a later time, such as 12:01 am on the next day, to determine whether or not the cash account  160  now contains sufficient funds as reflected in updated ACH activity. 
     This sweep may be performed in order to catch deposits that may have been made to the cash account  160  during the same day as the transaction activity, but not credited to the cash account  160  until the following business day. For example, the cardholder may have realized that a purchase was made with the card that could not be covered by the funds in the cash account  160 . The cardholder may have rushed to deposit funds into the cash account  160  in order to ensure that the purchase would be covered, only to have the deposited funds be credited to the cash account  160  after the initial authorization attempt. 
     At step  438 , another inquiry may be made to determine whether the cash account  160  contains adequate funds. 
     If there are now adequate funds in the cash account  160 , the funds will be drawn from the cash account  160  in step  442 , and the overdraft amount that was initially drawn against the credit account  140  may be cleared from the credit account  140  in step  446 . The cardholder may incur a fee for the temporary use of the credit account in step  450 , and the linked account card may be reactivated with the daily spending limit be replenished in step  422 . 
     In the event that there are still inadequate funds in the cash account  160  when the second sweep is performed, the linked account card account may remain suspended in step  454  until such time as the overdraft amount charged to the credit account  140  is paid off and there is a positive balance. The cardholder may then be subject to a fee, as well as any accumulating interest charges on the credit account. Again, this is unlike a typical debit card, where once a cardholder is forced to use the overdraft credit line, they may continue to do so until their line of overdraft credit is maxed out. In other words, conventional debit cards do not have the added safety feature of suspending the account and disallowing the user to accumulate more debt. 
     According to the invention, the cardholder may have access to their transaction history and daily spending limit information, via an interactive voice response (IVR) unit. This information may also be accessible through a web-site hosted by the card-issuing institution. Again, charges processed against the cardholder&#39;s cash account  160  may appear on the cardholder&#39;s monthly cash account statement as well. 
     In an alternative embodiment of the invention, two or more sweeps of the cash account may occur before requiring payment of the credit advanced in order to restore card privileges. In other words, the number of subsequent sweeps of the cash account  160  can be varied by the institution issuing the card. 
       FIGS. 4   b  and  4   c  illustrate settlement transactions initiated through use of a linked account card, according to an embodiment of the invention.  FIG. 4   b  illustrates an instance in which the linked account card  460  has been used to purchase goods and services which total a dollar amount  462  that is less than the card&#39;s “open to buy” amount  490 . When the predetermined time (which may be near the end of the day) arrives for the sweep of the designated cash account  470 , it is seen that the cash account  470  has an adequate balance  472  to cover the cost of the day&#39;s purchases. Accordingly, the funds can be withdrawn from the cash account  470 , and no overdraft action against the credit account  480  is needed. 
       FIG. 4   c  illustrates an example in which a cardholder has maxed out the “open to buy” amount  490  of the linked account card  460 , by purchasing goods and services in a graphically illustrated dollar amount  464  that exceeds the “open to buy” amount  490 . In this example, when the predetermined time arrives for the sweep of the designated cash account  470 , it is discovered that the balance  474  of the cash account is inadequate to cover the aggregate of the day&#39;s purchases. At this point, the funds  482  that cannot be drawn from the designated cash account (the overdraft amount) may be drawn from the credit account  480 . Additionally, the authorization server may temporarily suspend the cardholder&#39;s ability to make further purchases with the linked account card. 
     It may be noted that there may be an instance in which the cardholder, on one day, reaches the maximum “open to buy” amount of the card, while having a zero balance in the designated cash account to cover the purchases. For this reason, the credit account may preferably have a credit line equivalent to the “open to buy” amount of the linked account card. 
     In an alternative embodiment of the invention, the institution issuing the linked account card may choose to allow a cardholder to continue to use the linked account card once the cash account  160  is found to have insufficient funds. The cardholder may be given the option of continuing to draw from the remaining credit line available on the collateral card. This may be a desirable option for individuals who desire a traditional debit card, however are unable to have one because their bank does not offer the service. 
     In another alternative embodiment of the invention, the linked account card may be linked to multiple cash accounts designated by the cardholder in order to allow each to be swept in search of sufficient funds before the credit account  140  is needed. 
       FIG. 5  illustrates overall processing according to the invention, in another regard. 
     In step  502 , marketing solicitation is performed in order to identify potential linked account cardholders. Interested applicants may be required to complete an application detailing certain information pertaining to their financial history. Processing the application, as illustrated in step  506 , may comprise the steps of identifying account options most suited for each particular applicant (step  510 ), and making a decision regarding the applicant&#39;s ability to satisfy the particular requirements of these options (step  514 ). If it is determined that the applicant is approved, they will be required to specify a demand deposit account or other backing account that will provide the funds for purchases made with the linked account card. In step  518 , the designated cash account may be verified and the cardholder&#39;s linked account card account may be created. 
     Upon furnishing the linked account card and the account materials to the new cardholder (step  522 ), the cardholder may activate the card by calling a voice response unit (VRU), as seen in steps  526  and  530 . 
     Each purchase or transaction that the cardholder wishes to make with the linked account card may be subject to authorization (step  534 ). When a cardholder desires to make a purchase, and presents the card to a merchant, the merchant may request authorization from an authorization server through a payment network. This is illustrated in steps  538 ,  542 , and  546 , respectively. In step  550 , the authorization server may check to see whether or not the daily “open to buy” amount of the linked account card has been reached. The results of this check, coupled with the adherence to pertinent financial rules, can result in the determination of whether or not authorization for the transaction will be approved or denied (step  554 ). 
     Subsequent to the completion of an authorized transaction, settlement with the merchant occurs, as is illustrated in step  562 . The merchant may make a settlement request which is sent to the merchant&#39;s sponsoring bank or financial institution, through a processing network. The merchant&#39;s sponsoring bank or financial institution may pay the merchant, while simultaneously sending a request for payment to the institution that issued the linked account card. Settlement between the card-issuing institution and the merchant&#39;s sponsoring bank or financial institution may occur through an automated clearing house. 
     Aside from settlement with the merchant&#39;s sponsoring bank, the card-issuing institution has to settle with the cardholder. In step  566 , the cardholder&#39;s designated cash account may be swept to determine whether adequate funds are present to cover all of the day&#39;s charges accumulated through use of the linked account card. Note that the cash account may be swept at any pre-determinable time, which may typically be near the end of the day. If there are adequate funds available in the designated cash account (step  570 ), the funds may be withdrawn from the cash account and the authorization server  130  may reset the daily “open to buy” amount to its full amount in step  572  for the following day. 
     If the designated cash account does not have sufficient funds (step  574 ) to cover the charges at the time of the sweep, the status of the account may be evaluated at step  576 , and the cardholder&#39;s ability to make further purchases with the linked account card may be temporarily suspended. Additionally, the authorization server  130  may draw the necessary funds from the available credit account, as illustrated in step  580 . The cardholder may be charged a fee for the use of this credit account (step  582 ). Finally, one or more subsequent sweeps of the designated cash account may occur, as illustrated by step  584 . If adequate funds are present, they will be withdrawn from the cash account, and the credit account will be cleared. Otherwise, the daily purchasing abilities afforded the cardholder through use of the linked account card may continue to be suspended until the credit account is settled. 
     Communication with the cardholder (step  588 ) may take one or more forms. Statements of linked account card activity will be sent on a regular basis to the cardholder detailing each card transaction (step  590 ). Additionally, the cardholder may have access to their transaction history and daily spending limit information, via additional services (step  592 ) such as an interactive voice response (IVR) unit. This information may also be accessible through a web-site hosted by the card-issuing institution. 
     Other embodiments, uses and advantages of the invention will be apparent to those skilled in the art from consideration of the specification and practice of the invention disclosed herein. The specification should be considered exemplary only, and the scope of the invention is accordingly intended to be limited only to the following claims.