Answer:
by Randy Carey:
First, accepting your own credit cards in my mind would be a foolish practice. Why would you ever want to replace secured credit with unsecured credit?
Second:
If it is a Visa card (most current information that I have):
A Merchant must not accept a Card to collect or refinance an existing debt unless either:
● The Transaction results from conversion of a Merchant's existing card program to the Visa Program
or Visa Electron Program.
● The Merchant is a government agency and the Transaction represents a loan payment. In this case,
the Transaction amount must not equal the loan balance unless it is the final payment.
Last time I had access to their operating rules, Mastercard allowed it, provided that the Bank has registered its terminal to identify the transaction with a specific code (MCC 6051).
You probably really need to check with your card service provider to see if they allow it and under what conditions.
Answer:
by Richard Insley:
In addition to the rules (set by others) that apply to the cards, you must set your own rules for auto lending. If there are industry standards, they're probably based on this Henny Youngman one-liner:
A man goes to a psychiatrist. The doctor says, "You're crazy." The man says, "I want a second opinion!" "OK, you're ugly, too!"
Randy advises that it's crazy for a lender to replace secured debt with unsecured debt. The "ugly" part comes when examiners second-guess why you might be willing to step up the borrower's cost of credit (service fees and higher credit card rates) and are left with no explanation other than UDAAP.
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