CCEOM Cycle and Finance Calculation for Credit Unions in FLEX

This document outlines the procedures for running the Credit Card End of Month (CCEOM) billing cycle and finance charge calculations within the FLEX system. It also provides guidance on researching common issues and reviewing generated reports.

1. Credit Card End of Month Procedures

The following steps are suggested for a successful Credit Card End of Month process:

Review Statement Messages:
- Prior to running the CCEOM cycle, verify that the correct statement messages are present.
- Changes made after the cycle has run are difficult to correct and may incur billable time from FLEX.
- Accessing Statement Messages:
  - From the Credit Card Configuration menu, select Control Parameters.
  - Press F8 for Statement Messages.
  - Enter credit union-defined messages in the provided boxes.
  - Press F6 to add a statement message by loan type.
  - Custom Credit Card Notices:
    - Press F9 for Statement Notices.
    - Type ‘S’ in the Opt line and press Enter to edit notices.
    - Each notice has a customizable heading and message.
Run and Review Credit Card Worksheet Reports:
- Unallocated and Unbalanced Transaction Reports:
  - These reports should print without any accounts listed.
  - If accounts are listed, contact FLEX Loan Support for assistance.
- Negative Category Report:
  - Review this report for accounts with both negative and positive balances between member categories.
  - If found, perform Category Transfers through Transaction Entry. Failure to do so can lead to incorrect finance charge postings.
  - Recommendation: Run this report a few days prior to CCEOM, or weekly, for proactive review.
- Credit Card Fee and Interest Report:
  - Verify that the total amount is within an acceptable range compared to the previous month.
  - If not, contact FLEX Loan Support for assistance.
Update Files:
- After all reports have been thoroughly reviewed, return to the Credit Card Billing Cycle option.
- Enter ‘Y’ in the Update Files field to run the CCEOM cycle.

2. Charging Late Fees Outside of the Cycle Period

To charge late fees independently of the regular CCEOM cycle:

Generate Worksheets:
- Using Telnet, type the command: Call CC3006C N
- Review the generated worksheets before posting fees.
Post Late Charges:
- Once worksheets are reviewed, type the command: Call CC3006C Y
- Note: This action should only be performed after the grace period for late fees has passed and if late fees are not being posted during the regular CCEOM processing.

3. Credit Card Billing Cycle Execution

This option initiates the credit card end-of-period (month) billing cycle, performing the following functions:

Calculates finance charges.
Calculates and posts late fees.
Generates statements.
Calculates and posts over-limit fees.
Annual fee posting.
Calculation of MTD loan activity.
Calculation of minimum required payment.
Loan due date advance (non-delinquent loans).
Statement printing.

Navigation:

FLEX Search Bar: Type “credit card billing” and select option 20 Credit Card Billing Cycle.
Telnet Command Line: Type GO CC and then option 20.

Statement Period Screen (CC3000S):

From Date and To Date:
- Define the beginning and end dates of the billing period.
- Note: Dates can be overridden by pressing Shift+F12.
Update Files:
- Y: Runs the CCEOM cycle, posting all charges and generating statements.
- N: Produces a worksheet for review without posting. It is advised to run a worksheet first to identify and correct errors.

Understanding the Statement Period

Careful consideration is required when backdating or forward dating the billing cycle.

Backdating the Billing Cycle:
- Only possible if no transactions have been posted to any credit card loan between the current date and the backdated cycle date.
- Example: If the October billing cycle is run on November 1st and backdated to October 31st, it will run if no November 1st transactions (including FLEXTeller and Audio Response) have posted to the member’s credit card loan.
- A warning will appear if transactions exist outside the effective date.
Forward Dating the Billing Cycle:
- FLEX does NOT recommend forward dating.
- Any transactions occurring between the current date and the forward-dated cycle date will not be calculated within the current billing cycle. They will carry over to the next cycle.
- Example: Running the billing cycle on October 30th and forward dating to October 31st means transactions posted on October 31st will not be part of the October billing cycle. They will appear on the November statement, effective November 1st, impacting interest calculations.

Credit Card End of Month Cycle Messages

Certain messages require contacting FLEX Loan Support for assistance before proceeding with CCEOM:

Message One: “Loans exist that have balances that do not equal…” or “History transactions exist that do not…”
Message Two: “History transactions exist that do not…”
Message Three: “Last Card Activity…”

A warning message, “There are loans that exist with a negative balance. A report has printed showing the loans and their category balances. Please review this report before pressing <F1> to continue,” will also produce a report for review. No action is required to run the cycle, but review is important for accurate finance charge billing. Negative amounts can be advanced to another suffix if credit union procedure dictates.

4. Credit Card End of Month Reports

All CCEOM reports can be found through Document Manager if they do not print directly.

Accessing Reports via Document Manager:

In the FLEX search bar, type “document” and press Enter.
Double-click the Document Manager option.
Click the ‘Filter’ button in the top right.
From the Document Group dropdown, select “Credit Card End of Month Rpts”.
Leave Document Type as “All Document Types”.
Select the appropriate Date option from the dropdown.
Click ‘Ok’.

The system will display all relevant reports (worksheets and posting reports). Descriptions in Document Manager will indicate whether a report was a worksheet or a posting run. Minor differences between worksheet and posting reports may occur due to member payments and debits between report runs.

Key CCEOM Reports:

Credit Cards with Negative Categories Report (CC5004P):
- Shows all loan categories with a negative balance.
- Importance: Review this report before running the CCEOM cycle to ensure proper finance charge billing. Uncorrected negative categories will affect a member’s ending statement balance.
Credit Card Fee and Interest Detail Report (CC3000P-2):
- Provides a breakdown of fees and interest charged to each member’s account during the billing cycle.
Credit Card Fee and Interest Summary Report (CC3000P-1):
- Summarizes all fees and interest collected during the billing cycle, without detailed member information.
Credit Card Late Fees Report (CC3006P):
- Lists all credit cards that incurred a late fee during the billing cycle.
Credit Card Fee Refunds Detail Report (CC3081P):
- Detailed information about refunded fees to member accounts during the billing cycle.
Credit Card Fee Refunds Summary Report:
- Summary of all late fees refunded during the billing cycle.
Category Expiration / Delinquency Action Report (CC3001P-1):
- Shows expiration or delinquent actions taken on member accounts during the billing cycle.
Average Balances for Credit Cards Categories Report (CC1100P):
- Displays the average balance breakdown for all credit card loans over the cycle period. This report is crucial for finance charge research.

5. Finance Charge Calculations

The credit card module calculates finance charges based on:

Average period balance (by category)
Category Interest Rate
Number of Days in the billing period

Formula:

365(Average Daily Balance×Category Rate)=Daily Interest Rate\text{Daily Interest Rate} \times \text{# of Days in Billing Cycle} = \text{Finance Charge}

Calculation Process:

Last Statement Balance: The process begins with the last statement balance for the account.
Daily Balance Tracking: This balance is carried forward daily, adjusted by debits or credits (purchases, payments, merchandise returns) as they post to the suffix. This effectively creates a “bucket” for each day’s balance.
Average Period Balance: The total of all ending daily balances is divided by the number of days in the billing period to determine the average period balance.
CC1100P Report: When the CCEOM cycle runs, the system generates the CC1100P report, which shows the average daily balance, total debits and credits (by effective date), the category rate, and the number of days in the billing cycle.
Daily Interest Rate Calculation: The average daily balance is multiplied by the category interest rate, then divided by 365.
Finance Charge Calculation: The Daily Interest Rate is multiplied by the number of days in the billing cycle to arrive at the total finance charge for the period.

Example Calculation:

Day	Transaction	Daily Transaction	Daily Ending Balance
1			$2,000.00
2			$2,000.00
3			$2,000.00
4	Purchase	$249.64	$2,249.64
…	…	…	…
9	Purchase	$942.57	$3,192.21
…	…	…	…
11	Payment	-$1,000.00	$2,192.21
…	…	…	…
15	Purchase	$57.19	$2,249.40
…	…	…	…
21	Purchase	$423.24	$2,672.64
…	…	…	…
28	Payment	-$1,000.00	$1,672.64
…	…	…	…
31			$1,672.64

Total of all ending daily balances: $71,296.90
Number of Days in Period: 31
Average Daily Balance: $71,296.90 / 31 = $2,299.90
Category Rate: 12.90% (0.1290)
Daily Interest Rate: ($2,299.90 x 0.1290) / 365 = $0.81 (rounded)
Finance Charge: $0.81 x 31 = $25.20 (rounded)

Troubleshooting Finance Charges:

If finance charges appear incorrect, review the CC1100P report for the specific loan and suffix.
Verify that all purchases, payments, and merchandise returns have the correct effective date. Discrepancies often stem from transactions posted with incorrect effective dates.

6. Researching Finance Charges on Accounts

Grace Days

A common reason for finance charges is failure to pay the full statement balance within the grace period.

Grace Period Definition: Grace begins on the day the cycle is run and extends for the established length for each Credit Card Category.
Calculating Grace Period End: Count from the closing date of the cycle by the number of allowed grace days. The ending date is the last day a member can make their statement balance payment to avoid a finance charge.
- Example: If grace days are 31 and the billing period closed on the 5th of the month, the grace period starts on the 5th and ends on the 4th of the following month.
Industry Standard: At least 25 days grace on Purchases and zero on Cash Advances.
Verifying/Changing Grace Days:
1. In the FLEX Main Menu search bar, type “Categories”.
2. Select option 01 Maintain Categories under the Credit Card Loan Configuration Menu.
3. Select the category in question with an ‘s’ and press Enter.
4. Adjust the Grace Days field as needed.
5. Press Enter twice to confirm changes. Press F3 to exit without changes.

Payments Adjustments and Purchase Returns

Members can also incur finance charges if:

A payment is coded as an “adjustment.”
The member pays less than their stated statement balance due to purchase returns.

Explanation:

Adjustments: Corrections to the suffix balance, not considered payments. Purchase returns are also credit balance adjustments, not payments.
Avoiding Finance Charges: Members must pay their last statement balance in full within the grace period.
Teller Prompt: During transaction entry, when using transaction codes 16 or 56 (versus payment codes 06 or 46), the system prompts: “Apply toward the required payment.”
- Checked Box: The payment will be applied toward the required payment for the loan in the current period.
- Unchecked Box: The payment is considered an adjustment and will not count toward the required payment, though it will reduce the loan balance.
Identifying Adjustments: If a payment is coded as an adjustment, the system will place an ‘AD’ op code in the Type/OP code section of the History Transaction Detail.
Correcting Adjustment Issues:
1. Reverse the incorrect payment using transaction code 49. An effective date can be used but is not necessary.
2. Reapply the payment using the original transaction date as the effective date.
3. Crucially, ensure the “Apply toward the required payment” checkbox is checked. Using the wrong date or leaving the box unchecked can lead to finance charges.
For additional questions or assistance, contact FLEX Loan Support.

Credit Card Overpayments in the Interest Column

If a member overpays their credit card loan, the system allocates funds in the following order:

Statement balances
Current category balances
New purchases
Estimated interest due for the next end-of-period cycle
Remaining funds applied to the category in a negative amount

Explanation:

The system continuously recalculates average daily balances as activity occurs, estimating interest for the next cycle.
This calculation is dynamic and changes based on account activity and grace days.
Factors influencing interest owed include:
- The date the credit union runs its next end-of-period cycle.
- Charges/payments occurring on the member’s account before the end-of-period cycle.
Overpaid Amounts: Any overpaid amount (where the account balance reaches zero at the time of the transaction) may be used to satisfy interest due in the next period, credited back to categories, or applied as a negative amount.
Interest in Transaction History: If you see interest in the “Interest Column” of the Transaction History, it indicates the account was likely overpaid at the time of the transaction. If no further activity occurs and the interest due is satisfied, the amount will be credited back as a negative.

7. Credit Card Payment Allocation

Category Payment Sequences: How Payments are Applied

Payment breakdown is defined in the Payment Sequences of the Credit Card Loan Configuration menu. (Access via GO CCCFG option 2, then select the type in question).

System Defaults (User-definable):

By Interest Rate:
- Lowest To Highest
- Highest To Lowest (recommended for RegZ compliance)
Pro-Rated On Last Statement Balances.
Same Rate Categories: If both categories have the same rate, payment is applied in category order (01, 02, 03, etc.).

Payment Application Steps:

Payments are applied in two steps, following the defined category sequence:

Statement Balance: Applied first to the statement balance.
Category Balance: Then applied to the category balance.

Example:

Assume a member has:

$100.00 balance in Category 01 (statement balance)
$200.00 balance in Category 02 (statement balance)
An additional $1,000.00 in new purchases, increasing Category 01 balance to $1,100.00.

Payment application would be as follows:

$50 Payment: Applied $50.00 to Category 01.
$100 Payment: Applied $100.00 to Category 01.
$200 Payment: Applied $100.00 to Category 01, then $100.00 to Category 02.
$300 Payment: Applied $100.00 to Category 01, then $200.00 to Category 02.
Payment > $300:
- First $100.00 to Category 01.
- Next $200.00 to Category 02.
- Remaining funds then apply starting back at Category 01 (or the first category of the selected payment sequence) until it is paid off.
- If remaining funds exist after Category 01 is paid off, they are applied to Category 02 until it is paid off.
- If all categories are paid off and funds still remain, the system will apply them to the first category of the selected payment sequence (this could result in a negative category balance).

8. Credit Card Control Parameters

Users should review billing cycle control parameters, especially if new to credit card loans or if loan terms have changed.