IE981096A1 - Variable tiered interest rate revolving credit system and method - Google Patents

Abstract

A method and a system for operating a revolving credit system utilizing a table of tiered, variable interest rates in which one of the interest rates is applied as a finance charge to a remaining outstanding balance of an account depending upon the percentage that payments made during a billing cycle comprise of an account parameter, such as the outstanding balance, a highest balance or a beginning balance. In the preferred embodiment the applied interest rate is determined by the percentage the outstanding balance is reduced by payments on the balance during a billing cycle. Also in a preferred embodiment of the invention, the tiered interest rate table is structured to apply progressively reduced interest rates to outstanding balances reduced by progressively greater payment percentages from the previous billing cycle, thereby encouraging a credit customer to make larger payments and pay down the outstanding balance faster. The interest rate of each tier is tied to, 34, and floats with, an index, such as the Prime Rate, so that each tier represents a different spread, or increase over, the index. Also in the preferred embodiment, the system calculates, 46, and displays the minimum payments necessary to reduce the outstanding balance to meet each tier of the interest rate table.

Description

VARIABLE TIERED INTEREST RATE REVOLVING CREDIT SYSTEM AND METHOD Background This invention relates to methods and systems for operating revolving credit programs and, more specifically, to revolving credit programs in which the interest rate applied to an outstanding balance is varied according to an external index.

Revolving credit programs typically are offered by banks, savings and loans, federal savings banks, credit unions and other credit providers, and operate to advance funds as cash advances or to pay for purchases made by a customer, such as through a credit card or a personal line of credit, and in some instances to pay for checks written by the customer, or to cover funds provided through other access devices, such as automatic teller machines, telephone communication devices and personal computers. Under such revolving credit programs, a customer enters into an agreement with a credit provider in which the unpaid balance of the customer’s loan is assessed a finance charge which represents either a fixed interest rate or a variable interest rate which is tied to the prime rate or some other interest rate index.

Once debt is incurred, the customer generally has three options for repayment of the debt. One option is for the customer to pay the entire outstanding a balance and, in the case of purchase transactions, avoid assessment of any interest or finance charges. A second option is for a customer to pay a minimum amount required by the credit provider to reduce the amount of the outstanding balance and defer the remaining outstanding balance for later payment. In that case, the customer is assessed interest or finance charges based on the remaining outstanding balance.

Under the third option, the customer pays more than the minimum required by the credit provider, but less than the entire outstanding balance. If this alternative is chosen, the customer is assessed interest or finance charges in the same way as the second option.

INT CL t? —fit*-/ Docket 050001.216 There presently exist programs in which a tiered interest rate is applied to an outstanding balance. Specifically, different interest rates are applied to various levels of an outstanding balance. Further, systems exist in which different interest rates are applied to varying levels of purchases, or to types of purchases. All such programs are designed to encourage the credit customer to increase purchase volume and/or increase outstanding balance.

The market for providing credit is highly competitive, with banks, savings and loans, credit unions and credit card companies all pursuing the same potential borrower. In order for a credit provider to remain competitive, especially in an economy which is subject to frequent changes in the cost of money to the credit provider, it is necessary to adjust the interest rate assessed on outstanding balances in order to keep pace with changes in, for example, the Prime Rate.

Furthermore, it is desirable to maintain levels of personal debt at a minimum, which tends to minimize credit card delinquency rates. Accordingly, there is a need for a revolving credit system which provides an incentive to encourage a credit customer to pay off his or her outstanding balance quickly. Furthermore, such a system should be keyed to an external index, such as the Prime Rate, so that the rates offered customers are competitive, and at the same time provide the lender with a profit margin which will remain relatively constant. Such a system should also be entirely automated and operable on the platform of a personal computer or computer network.

Summary The present invention is a fully automated system and method for operating a revolving credit program through a credit provider which provides an incentive for revolving credit customers to minimize their revolving credit debt, thereby encouraging responsible financial management. Furthermore, the invention provides an interest rate which fluctuates with an external index, such as the Prime Rate or a -2IE 981096 Docket 050001.216 treasury bill rate, or an internal rate, determined by the lender, thereby providing a lender with a relatively predictable margin or spread.

In a preferred embodiment of the invention, a revolving credit system and method are provided in which the interest rate finance charge applied to the outstanding balance of a customer's account varies according to the percentage of the outstanding balance paid by the customer in a billing cycle, and according to variations in the Prime Rate, while maintaining a constant “spread” (e.g., a rate of 2 percentage points over Prime). The greater the percentage of the outstanding balance paid off by the customer in a billing cycle, the lower the interest rate applied to the remaining Ό unpaid outstanding balance during the next billing cycle. In the alternative, the interest rate finance charge can be varied according to the percentage of other parameters of the account, such as beginning balance, highest balance or average balance in the billing cycle.

Also in the preferred embodiment, the system and method provides a tiered interest rate structure. For example, for a current Prime Rate of 8.9% and a three tier system of 5%, 3% and 2% is in place, if a credit customer pays 2% of the outstanding balance in a billing cycle, the interest applied to the remaining outstanding balance would be 13.9% (current Prime Rate of 8.9% plus 5%); if the credit customer pays 3% of the outstanding balance, the applied interest rate is reduced to 11.9% (current Prime Rate of 8.9% plus 3%); and if the credit customer pays 5% or more of the outstanding balance, the applied interest rate is further reduced to 10.9% (current Prime Rate of 8.9% plus 2%). Of course, other external indices, index spreads, and payment percentages can be applied, as well as different numbers of interest rate tiers, without departing from the scope of the present invention.

Consequently, the system and method of the present invention is sufficiently flexible to accommodate month-to-month variations in a credit customer's financial situation by offering a number of different payment options, and is responsive -3IE 981096 Docket 050001,216 to month-to-month variations in the cost of money to a lender. The tiered applied interest rate structure of the invention allows a credit customer to choose his or her minimum payment and interest rate, while at the same time maintains a reasonably predictable margin for the lender.

The system and method of the preferred embodiment of the present invention also provides a display, which may be on a monitor or in printed form, of the previous outstanding balance, the payments received, the finance charge applied, the new outstanding balance and the minimum payment amounts necessary to qualify the credit customer for each interest rate level, and the interest rates applicable for the next month.

The system is designed to be operable on a personal computer, a network of personal computers, or on a mainframe computer, and includes software having a set of instructions for operating the computer. The software is stored on a disk, tape, hard drive or other storage media, and is loaded into the memory of the computer from storage during use. All information pertaining to the account is kept in storage in the computer, or is accessible over a network, as is the table of payment percentages and corresponding interest rates, and payment amounts required to achieve each rate tier. The interest rates are varied monthly, if need be, by inputting the Prime Rate (as in the preferred embodiment) as of a given day, such as the 25th day of the second month preceding the first day of the billing cycle. The Prime Rate is added to the spread points for each tier scale to determine the applied interest rates. Alternatively, the numerical values of the applied interest rate (the sums of the Prime Rate and the spread points for each tier scale) is inputted to the system. Each transaction, whether it is a payment or a debit to the account, is also entered and stored for each account.

The system is adaptable to be used with credit card programs, home equity loan programs, and unsecured lines of credit, to consumers for personal, family -4IE 981096 Docket 050001.216 and household purposes, as well as to business entities for business, agricultural, and governmental uses.

Accordingly, it is an object of the present invention to provide a system and method for operating a revolving credit program; a system and method for operating a revolving credit program which encourages a credit customer to pay off an outstanding account balance quickly; a system and method for operating a revolving credit program having a tiered interest rate structure such that a lower interest rate is applied to a remaining outstanding balance in response to higher balance percentage pay-off in a billing period; a system and method for operating a revolving credit program in which the interest rate applied at each tier varies with an external index, such as the Prime Rate; and a system and method for operating a revolving credit program which can be operated from a personal computer, network or mainframe platform.

Other objects and advantages of the present invention will be apparent from the following description, accompanying drawing and the appended claims.

Brief Description of the Drawing The Figure is a flow chart showing the operation of the method of the present invention on a personal computer, computer network or mainframe.

Detailed Description The Figure shows a flow chart which represents the operation of a personal computer, computer network or mainframe programmed to embody the system of the present invention and to perform the method of the present invention. The instructions for performing the process of the system preferably are in the form of computer software which is kept in a storage medium, such as a disk, tape, hard drive -5IE 981096 Docket 050001.216 or the like. The software is loaded into computer memory from storage when the program is to be implemented.

Functional block 10 represents the wait state of the system. The method of the invention is triggered by the occurrence of either the end of a billing period or a transaction being entered into a credit customer's account. In the preferred embodiment, a timing program (not shown) internal to the computer platform and operated according to the method of the invention will signal the system of the end of a billing period, which may correspond to the end of a calendar month. Accordingly, functional block 12 indicates that the system is activated at the end of a billing period, or, as shown in block 14, if a transaction is entered. If no transaction occurs, and the end of a billing cycle has not occurred, the system remains in the wait state of block 10.

If there is a transaction, as shown in block 14, the operator or system enters the credit customer’s account number, the nature of the transaction (i.e., payment, debit or the like) and the date of the transaction, as shown in block 16. This information is stored in the computer system, as shown in block 18.

The central processing unit of the computer system then reads into memory from storage the current outstanding balance of the credit customer’s account, as shown in block 20. Once the current outstanding balance is read into memory, the outstanding balance is adjusted by the transaction amount in order to arrive at a new, interim outstanding balance (I.O.B.), as shown in block 22. This new interim outstanding balance is then stored in the system, as shown in block 24. The system then returns to the wait state of block 10. This iteration through blocks 10-24 may occur several times in the course of a billing cycle, each time a transaction is entered. A billing cycle typically is a one month or thirty day calendar period, but may be any time period agreed upon by the credit provider and the credit consumer.

At the end of the billing period, shown at block 12, the system is programmed to calculate an average daily balance, shown in block 26. The average -6IE 981096 Docket 050001.216 daily balance method is a conventional calculation in which the I.O.B. at each day of the current billing period is determined, then the daily balances are averaged over the billing period. In the alternative, the system may be programmed to calculate finance charges based on ending balance, two cycle average daily balance, and the like, without departing from the scope of the present invention. This average daily balance, or amount calculated using one of the alternative methods listed above, is then stored in the system, as shown in block 28. In addition, the total payments made during the current billing period are summed and stored, as shown in block 30.

The central processing unit next calculates the percentage the total payments made during the current billing period comprise of the previous month's outstanding balance, or the percentage of balance reduction, as shown in block 32.

The unit then reads a value representing the Prime Rate (or other external index) as of the 25lh day of the month preceding the first day of the billing cycle. This Prime Rate is inputted to an appropriate file in data storage for the personal computer or mainframe by an on-line connection between the lender and the service provider, so that the value representing the Prime Rate can be directly inputted, as shown in block 34. The data processor then adds the Prime Rate value to stored values representing the spread points for each tier scale, to determine the applied interest rates, as shown in block 36. Alternatively, the numerical values of the applied interest rate (the sums of the Prime Rate the and spread points for each tier scale) are calculated by an individual and inputted to the system.

The system then selects the appropriate tier scale for the credit customer or borrower, as shown in block 38. As shown in block 40, the system then reads the stored table of percentages and corresponding tiered interest rates and compares the calculated percentage of balance reduction of block 32 to match it with one of the stored percentages of the table. Each stored percentage in the table has a corresponding interest rate, calculated as shown in block 34. In the alternative, the -7^ Docket 050001.216 system can utilize other customer account parameters, such as comparing the balance reduction to the beginning balance or to the highest balance in the billing cycle to determine a percentage, without departing from the scope of the invention.

The interest rate corresponding to the percentage which matches the percentage of balance reduction calculated in block 32 is then selected as the applied interest rate, all as shown in block 40. The applied interest rate selected in block 40 is then applied to the average daily balance (“A.D.B.”) calculated in block 26 and stored in block 28, to arrive at a finance charge, as shown in block 42.

The finance charge is then added into the I.O.B., calculated in block 24, to arrive at a new balance. This new balance value is then stored, as shown in block 44. The new balance then becomes the outstanding balance which is read and adjusted pursuant to the process shown in blocks 14-24 in the next billing cycle.

Using the new balance calculated in block 44, the system then calculates and stores the minimum payments necessary to meet the threshold percentages necessary to qualify for the varying tiered interest rates of block 40, as shown in block 46. Finally, a statement (or terminal display) is generated by the system which shows values for the new balance calculated in block 44, the finance charge calculated in block 42, and the proposed minimum payments calculated in block 46 to qualify for each tiered level of interest, as shown in block 48 and the interest rates for each tier calculated in block 36. The statement may contain any or all of this information in addition to other account information and disclosures as required by federal law and subject to change from time to time.

If the display is in the form of a statement, the statement is then sent to the credit customer. Therefore, the credit customer not only receives a current status report of his or her account, showing the current new balance, the finance charge applied and the payments received in the just-completed billing cycle, but the credit -8IE 981096 Docket 050001.216 customer also receives a schedule of minimum payments necessary to qualify for each tier of reduced interest rates effective for the customer's next billing cycle.

Specific Example Ina specific example, the Prime Rate as of the 25131 day of the month preceding the first day of the billing cycle is 8.9%. The spread points for a tier scale are as follows: TABLE I.

Percent of Outstanding Balance Paid % and over 3% to 4.99% 2% to 2.99% Spread Points 2% 3% % Accordingly, the applied annual interest rate would be as follows: Percent of Outstanding Balance Paid % and over 3% to 4.99% 2% to 2.99% TABLE II Applied Ann. Interest Rate .9% 11.9% 13.9% If a credit customer has an outstanding balance at the end of a billing period of, for example, $3000.00 (comprising, for example, principal of $2960.00 and a finance charge of $40.00), and during the course of the subsequent billing period makes a -9-IE 981096 Docket 050001.216 payment on day 14 of that subsequent billing period of $150.00, the balance at the end of that subsequent billing period (before the finance charge is applied) will be $2850.00, a balance reduction of 5%. Then, according to the Table II set forth above, the credit customer qualifies for an applied annual interest rate of 10.9%, which is a monthly periodic rate of 0.9083%.

This 0.9083% is applied to the average daily balance to arrive at the finance charge. In this example, the average daily balance would be $2897.67, which is arrived at by adding up the outstanding unpaid principal balance for each day of the billing period and dividing the total by the number of days in the billing period (for example, 30 days): ($2960.00 x 13 days) + ($2850.00 x 17 days) = $2897.67 30 days The finance charge would then be $26.32 ($2897.67 x 0.9083%), making a new balance of $2876.32. The calculations would be similar for any ending balance representing an outstanding balance reduction of 5% or more, up to but not including full payment of the outstanding balance. Specifically, the same monthly periodic rate would be applied from the table, but the average daily balance, and therefore the finance charge, would be less.

If the credit customer pays only $90.00, which would result in a balance reduction of 3%, according to Table II, an annual interest rate of 11.9% (which is a monthly periodic rate of .9917%) is applied to the average daily balance, which would be $2931.67 (assuming payment of the $60.00 is made on day 14 of the billing cycle), resulting in a finance charge of $29.07, which is added to the interim outstanding balance of $2910, for a new balance of $2939.07. The system would perform similar -10IE 981096 Docket 050001.216 calculations for any ending balance representing an outstanding balance reduction of at least 3% and up to 5%.

Similarly, if the credit customer pays only 2% of the $3000.00 outstanding balance, a payment of $60.00, the average daily balance would be $2948.67 (again assuming the payment of $60.00 is made on day 14 of the billing cycle), and the applied annual interest rate for a 2% balance reduction taken from Table II is 13.9%, a monthly periodic rate of 1.158%. The finance charge is then $34.15.' Accordingly, the new balance would be $2974.15. However, if the credit customer pays less than 2% of the outstanding balance, the same annual interest rate is applied, but that credit customer would be considered delinquent.

Of course, the look-up table represented by Table II above and utilized in block 40 of the Figure can be varied to provide for different numbers of tiers, or for different interest rates for each percentage tier, or for different percentages of balance reduction, without departing from the scope of the present invention.

Applying the values set forth to the display block 48 for a 5% balance reduction (i.e., a payment of $150.00 toward an outstanding balance of $3000.00 in the specific example), the display would include a listing of the new balance of $2876.32. Furthermore, the display of block 48 would also include a listing of the minimum payments necessary to meet the 5%-3%-2% outstanding balance reduction to qualify for each of the tiered interest rates of Prime plus 2%, Prime plus 3% and Prime plus 5%, respectively, namely, payments of $144.00, $87.00, and $58.00, respectively, for the new outstanding balance of $2876.32 discussed above (assuming that the Prime Rate does not change in the interim). These minimum payment amounts may be rounded up or down to the nearest dollar amount without departing from the scope of the present invention.

In conclusion, the credit customer is encouraged to make larger payments which represent larger percentages of the outstanding balance in order to qualify for the -11, Docket 050001.216 corresponding lower applied interest rate. An end result desired by the credit provider who utilizes this system would be fewer delinquent accounts. Furthermore, by tying the applied interest rate to an index such as the Prime Rate, the lender can stabilize the return generated by a particular account The tiered interest rate system of the present invention can be utilized with any revolving credit program, including credit card programs, home equity lines of credit, and secured and unsecured lines of credit. Such programs cdn be used by individuals for home, consumer product and automobile purchases, and by businesses and governmental entities for commercial and agricultural purchases.

While the form of apparatus and method herein described constitute preferred embodiments of this invention, it is to be understood that the invention is not limited to these precise forms of apparatus and methods, and that changes may be made therein without departing from the scope of the invention.

Claims (35)

1. A method for operating a revolving credit system utilizing a tiered, variable interest rate structure performed on or with aid of a computer comprising the steps of: providing a system for storing information pertaining to a credit customer's account, calculating applied interest and finance charges and displaying the status of 5 said account; storing a value of an outstanding balance of said account; storing an amount of a transaction pertaining to said account; calculating an interim outstanding balance by adjusting said outstanding balance by said transaction amount; 10 calculating a percentage of balance reduction said transaction amount bears to said outstanding balance; selecting an index; selecting a plurality of percentage point spread values; adding said index to said spread values to generate a plurality of interest 15 rates of differing amounts and storing said interest rates; matching said balance reduction percentage to a table of stored percentages, each of said stored percentages corresponding to one of said plurality of interest rates, to determine an applied interest rate selected from said interest rates; calculating a finance charge from said applied interest rate; and 20 adding said finance charge to said interim outstanding balance to yield a new outstanding balance, and storing said new outstanding balance.

2. The method of claim 1 further comprising the step of displaying said new outstanding balance, said applied interest rate, said finance charge and said transaction amounts. -13IE 981096 Docket 050001.216

3. The method of claim 1 further comprising the step of calculating minimum payments required to reduce said new balance by percentages corresponding to said stored percentages.

4. The method of claim 3 further comprising the step of displaying said minimum payments.

5. The method of claim 4 wherein said step of displaying said minimum payments includes printing a statement for said credit customer.

6. The method of claim 1 wherein said selected interest rates differ from each other.

7. The method of claim 6 wherein said selected interest rates differ such that a higher interest rate is associated with a lower one of said stored percentages, such that said table provides tiered interest rates which decrease with increasing ones of said stored percentages.

8. The method of claim 1 wherein said index is the Prime Rate.

9. A method for operating a revolving credit system utilizing a tiered interest rate structure comprising the steps of: providing a system for storing information pertaining to a credit customer's account, calculating applied interest and finance charges and displaying the status of 5 said account; storing a value of an outstanding balance of said account; storing an amount of a transaction pertaining to said account; -14IE 981096 Docket 050001.216 calculating an interim outstanding balance by adjusting said outstanding balance by said transaction amount; I0 calculating a percentage of balance reduction said transaction amount bears to said outstanding balance; selecting and storing an index corresponding to the Prime Rate; selecting and storing a plurality of percentage point spread values; adding said index to said spread values to generate a plurality of interest 15 rates of differing amounts; matching said balance reduction percentage to a table of stored percentages, each of said stored percentages corresponding to one of said plurality of interest rates, to determine an applied interest rate selected from said interest rates, wherein said selected interest rates differ from each other such that a higher interest 20 rate is associated with a lower one of said stored percentages, such that said table provides tiered interest rates which decrease with increasing ones of said stored percentages, to determine an applied interest rate from said selected interest rates; calculating a finance charge from said applied interest rate; adding said finance charge to said interim outstanding balance to get a 25 new outstanding balance, and storing said new balance; calculating minimum payments required to reduce said new balance by percentages corresponding to said stored percentages; displaying said new outstanding balance, said applied interest rate, said finance charge, said transaction amounts and said minimum payments by printing a statement for said credit customer.

10. A method for operating a computer to provide data regarding interest rates comprising the steps of: storing a value of borrower's outstanding indebtedness in a computer; -15IE 981096 Docket 050001.216 storing a value of a remaining outstanding balance representing a 5 reduction of said outstanding balance by an amount paid by said borrower; calculating a percentage said amount paid by said borrower bears to said outstanding indebtedness to generate a balance reduction percentage; selecting and storing an index; selecting and storing a plurality of percentage point spread values; 10 adding said index to said spread values to generate a plurality of interest rates of differing amounts; matching said balance reduction percentage to a table of stored percentages, each of said stored percentages corresponding to one of said plurality of interest rates, to determine an applied interest rate selected from said interest rates, the 15 values of said percentages being stored in a computer; and applying a selected one of said rates, decreasing said interest rate assessed on the outstanding indebtedness inversely to said percentage selected.

11. The method of claim 10 further comprising the step of storing a table of values in said computer, said values representing a series of ranges of percentage of outstanding balance paid are matched to corresponding interest rates.

12. The method of claim 11 wherein said index is the Prime Rate.

13. A system for management of a plurality of credit accounts comprising: a computer storage device having a plurality of files, certain of said files including current credit account data associated with a credit customer, certain of said files including a table of percentage point spread values, a file having a value 5 corresponding to an index and a file including a table having a list of percentages of -16IE 981096 Docket 050001.216 balance reduction and corresponding interest rate values, said interest rate values representing the sums of said spread values and said index; a data input device for entering borrowing and payment activity into appropriate ones of said files of said storage device, for entering a value corresponding 3 to an index into appropriate ones of said files of said storage device and for entering interest rate spread values into appropriate ones of said files; a processing unit for reading a stored value of an outstanding balance of one of said credit accounts, reading a stored value of a total amount paid by a credit customer during a billing period, comparing said total amount paid value to said j outstanding balance value, calculating a percentage of account balance reduction, comparing said percentage of account balance reduction to match one of said table of interest rate values to determine an applied interest rate, calculating a finance charge to be applied to said outstanding balance to arrive at a new outstanding balance, and storing said new outstanding balance in an appropriate one of said account files.

14. The system of claim 13 further comprising a display showing said values for said outstanding account balance, said finance charge, said payments and said new outstanding balance.

15. The system of claim 13 wherein said processing unit calculates minimum payments to be made with respect to said new outstanding balance for balance reduction percentages corresponding to said interest rates of said table.

16. The system of claim 15 further comprising a display for showing said minimum payments. Ί /· The system of claim 13 wherein said index is the Prime Rate -

17. -.IE 981096 Docket 050001.216

18. A method for providing variable rate repayment of a debt of a credit customer comprising the steps of: storing a value of a credit customer's current outstanding indebtedness; comparing a value of a payment made by said credit customer to said 5 current outstanding indebtedness and determining a percentage said payment makes tc said current outstanding indebtedness; selecting an index and a plurality of percentage point spread values; adding said index to said spread values to generate a plurality of interest rates of differing amounts and storing said interest rates; i 0 matching said balance reduction percentage to a table of stored percentages, each of said stored percentages corresponding to one of said interest rates, to determine an applied interest rate selected from said interest rates; and calculating a finance charge based upon said applied interest rate and adding said finance charge to said current outstanding indebtedness.

19. The method of claim 18 further comprising the step of deducting said payment from said current outstanding indebtedness prior to said finance charge calculating step to arrive at an updated outstanding indebtedness.

20. The method of claim 18 further comprising the step of periodically adjusting values of said corresponding tiered interest rates.

21. The method of claim 18 further comprising the step of displaying said current outstanding indebtedness, said finance charge and said corresponding tiered interest rates on a statement. -18-. Docket 050001.216

22. The method of claim 19 further comprising the step of storing a value of a sum of said updated outstanding indebtedness and said finance charge.

23. The method of claim 22 wherein said stored value of said sum becomes an updated current outstanding indebtedness.

24. The method of claim 23 wherein said value comparing'step and said steps subsequent thereto are performed upon said updated current outstanding indebtedness. 5

25. The method of claim 18 wherein said index is the Prime Rate.

26. A method for operating a revolving credit system utilizing a tiered interest rate structure comprising the steps of: providing a system for storing information pertaining to a credit customer’s 10 account, calculating applied interest and finance charges and displaying a status of said account; storing a value of a parameter of said account; storing an amount of a payment transaction pertaining to said account; calculating a percentage said payment transaction amount bears to said 15 account parameter to generate a balance reduction percentage; selecting an index and a plurality of percentage point spread values; adding said index to said spread values to generate a plurality of interest rates of differing amounts and storing said interest rates; matching said balance reduction percentage to a table of stored 20 percentages, each of said stored percentages corresponding to one of said interest rates, to determine an applied interest rate selected from said interest rates; -19< Docket 050001.216 calculating a finance charge from said applied interest rate; and adding said finance charge to an account balance to get a new outstanding balance, and storing said new balance.

27. The method of claim 26 wherein said account parameter is a beginning balance.

28. The method of claim 26 wherein said account parameter is a highest balance in a billing cycle.

29. The method of claim 26 wherein said account parameter is an outstanding balance.

30. The method of claim 26 wherein said index is the Prime Rate.

31. A computer readable memory for directing a computer to perform a method for operating a revolving credit system utilizing a tiered interest rate structure comprising the steps of: providing a system for storing information pertaining to a credit customer's account, calculating applied interest and finance charges and displaying the status of said account; storing a value of an outstanding balance of said account; storing an amount of a transaction pertaining to said account; calculating an interim outstanding balance by adjusting said outstanding balance by said transaction amount; calculating a percentage of balance reduction said transaction amount bears to said outstanding balance; -20< Docket 050001.216 selecting an index and a plurality of percentage point spread values; adding said index to said spread values to generate a plurality of interest rates of differing amounts; matching said balance reduction percentage to a table of stored percentages, each of said stored percentages corresponding to one of said interest rates, to determine an applied interest rate selected from said interest rates; calculating a finance charge from said applied interest rate; and adding said finance charge to said interim outstanding balance to get a new outstanding balance, and storing said new balance.

32. The memory of claim 31 wherein said index is the Prime Rate.

33. A method according to any of claims 1 to 8, 9, 10 to 12, 18 to 25 or 26 to 30 substantially as described herein with reference to and as illustrated in the accompany drawing.

34. A system according to any one of claims 13 to 17 substantially as described herein with reference to the drawing.

35. A computer readable memory according to claim 31 substantially as described herein with reference to the accompanying drawing.