Overview: Credit Cards

This section includes all information about Solaris' credit cards solution, including the key concepts, product specifications, and integration guides for each customer segment.

How does a credit card work?

A credit card is a card with an attached credit limit issued by a bank or a financial institution. Credit cards allow customers to borrow money from the bank within the card's attached credit limit to pay for goods or services.

Cardholders must pay back the borrowed money and any accrued interest or charges at the end of each billing cycle. Cardholders can pay the outstanding balance either in full or in part (starting from a minimum amount).

The credit card limit is determined based on the customer's creditworthiness and credit score.

Product overview

Our credit card solution enables you to offer credit cards to your customers in your brand with lots of flexibility and customization. Our solution comes with an automated credit scoring system and a Know Your Customer (KYC) flow, which enables you to onboard customers with just a few API calls.

Solaris offers credit cards to the following customer segments:

• Retail customers (Consumers)
• Business customers
• Freelancers & sole proprietors

How does it work?

The following diagram gives a high-level overview of the process:

User journey

Your customers can apply for a credit card by completing the following steps:

1. Providing the required data points (personal and financial data).
2. Consenting to Solaris' Terms and Conditions and credit checks.
3. Successfully passing Solaris' credit scoring process.
4. Successfully completing the KYC/BKYC flow.
5. Signing the relevant contracts and SDD mandate.

The specific onboarding requirements of credit cards depend on the customer segment and the credit card type. Please see the full integration guides for step-by-step instructions.

Types of credit cards

You can offer your customers the choice between charge and revolving cards.

Charge cards vs. revolving cards

The difference between a charge card and a revolving card is the repayment option, applicable interests, and the onboarding requirements.

With charge cards, cardholders select to repay any used balance from their credit limit in full at the end of each billing cycle, and therefore no interest is charged.

On the other hand, with revolving cards, cardholders choose to make only a partial payment at the end of each billing cycle. Interest accrues on the used balance from the settlement date of a transaction.

Customers can choose between the two options, and can also switch between them after the initial onboarding.

The following table gives an overview of the differences between charge and revolving cards:

Scoring

Customers applying for a credit card must go through a credit scoring process. Solaris uses a credit scoring system to make informed credit decisions on credit card applications. The scorer analyzes different information, such as the customer's self-declared financial information and credit data pulled from external credit bureaus (such as SCHUFA), to assess their creditworthiness and determine their risk level and credit eligibility.

The scoring process has two phases:

1. DQ: Disqualification criteria to ensure that the customer's self-declared information meets our minimum eligibility criteria. During this phase, the scorer checks data, such as the customers' income, living expenses, and existing credit expenses.

2. Scoring: In this phase, Solaris pulls the customer's credit history from credit bureaus and assigns a score while taking into consideration the following factors:

   • Income: The customer's monthly net income.
   • Living expenses: The total monthly expenses, including rent, utilities, insurance, and other living expenses, compared to the customer's net income.
   • Credit expenses: The customer's existing credit expenses, such as loan repayments, or other active credits, such as overdrafts or credit cards.

The scorer considers additional factors for businesses and freelancers, such as the company's age, business activities, balance sheet, etc.

Based on the scoring results and the customer's probability of default (PD) rate, Solaris decides whether to offer the customer a credit card. The score also affects the credit limit to be offered to the customer.

Credit card usage

Your customers can use a credit card in the same way as a debit card. However, please note the following rules that govern the usage of the credit card and its associated account:

Incoming transfers

Customers can receive incoming funds to their credit card account (e.g., via SEPA Credit Transfer (SCT), Target2, OCT) to top up their account with the following restrictions:

• Incoming transfers are only allowed from the customer's reference account tied to the card.
• Restrictions on maximum amounts for incoming transfers may apply.

Outgoing transfers

Customers can make outgoing transfers from their credit card accounts with the following restrictions:

• Outgoing transfers are only allowed to the customer's reference account tied to the card. For this purpose, use POST Initiate reference account payout to a person or POST Initiate reference account payout to a business.
• Outgoing transfers may also be restricted to only positive balances and not from the credit limit.

Card payments

Customers can use their credit cards for all kinds of card payments without any restrictions.

Cash withdrawals

Customers can use their credit cards to withdraw cash, subject to additional charges.

Billing cycles and statements

Billing cycles

A billing cycle is a period between two billing statements. At the end of each billing cycle, a statement will be issued, which includes all your purchases, the available and used balance, all interest and charges accrued during the cycle (if any), and the payment to be paid on the due date. The period between the billing cycle's end date and the payment due date is known as the grace period.

The billing cycle length varies depending on the card issuer, but it's typically one month.

Statements

At the end of each billing cycle, Solaris will issue a credit card statement, which will be delivered to the customer via Postbox. The credit card statement includes the following details:

• Total outstanding balance: The total amount used from the credit limit.
• Total available balance: The total amount available from the credit limit.
• Billing period: The billing cycle start and end date.
• Outstanding charges: Any interest charges or fees from the billing cycle.
• Payment due date: The date when Solaris will collect the outstanding payment via SDD.
• Amount due: Either the full outstanding balance must be paid by the due date (in case of charge cards) or the minimum amount (in case of revolving cards).
• A list of all transactions made during the billing cycle.

Interest accrual

Interest accrues only for revolving credit cards (wherein the customer only has to pay a portion of their outstanding balance) and NOT for charge cards. If the customer changes their repayment option from full to partial (i.e., from a charge card to a revolving card) within a single billing cycle, interest will accrue on the outstanding balance only for the days on which the partial repayment option was effective.

When they establish a partial repayment plan, the customer has to select a minimum percentage and/or a minimum amount which falls within the lower and upper minimum limits set in your product configurations. If both options are set (a minimum amount and a minimum percentage), Solaris will apply whichever is higher.

Example

The following example explains Solaris' interest calculation logic on a customer's account with the following settings:

• Interest rate: 12,24%
• Repayment plan: 10% or 50 EURO
• Billing cycle: Monthly
• Billing cycle start date: 01 May 2022
• Billing cycle end date: 30 May 2022
• Statement date: 31 May 2022

The interest calculated based on the minimum rate of 10% equals 47.86 EUR for the given month.

The interest calculated based on the minimum amount for the given month is 50 EUR.

At the end of the billing cycle, the customer will pay 50 EUR, as it is the higher value of the two.

Repayments

Credit card repayments are made automatically via a SEPA Direct Debit (SDD) from the customer's reference account. Additionally, customers can top up their accounts via SEPA Credit Transfer (SCT), Target2, OCT, etc.

During the onboarding process, you must do the following:

Create SDD mandate

You must create an SDD mandate and collect the customer's consent to enable Solaris to trigger SDDs from the customer's reference account on the due date of each billing cycle.

Create reference account

Each customer must have a reference account linked to their credit card, from which the SDD will be pulled on the due date of each billing cycle.

Set repayment option

During the onboarding phase, the customer chooses a repayment option (either FULL or PARTIAL). In case of partial repayments, you must set a minimum amount and percentage to be paid each billing cycle (Solaris applies whichever is higher). In case of full repayments, the full outstanding amount will be due at the end of each billing cycle.

Repayment flow

The following diagram explains how the billing process works:

Integration guides

For step-by-step instructions on how to integrate credit cards for each customer segment, check the relevant guides:

• Business Credit Cards
• Consumer Credit Cards
• Freelancer Credit Cards

API reference

The following link will take you to the credit card product's API reference documentation.

• Credit cards API reference documentation