Method for minimizing overdraft charge-off

Abstract

A method for minimizing overdraft charge-off in a bank account includes: (a) identifying a plurality of factors that can result in a bank account charge-off; (b) building a case history database of bank account holder information based upon a plurality of data elements associated with each of the plurality of factors; (c) creating numeric and/or categorical representations of the bank account holder information for each of the bank accounts in the case history database; (d) tabulating the numeric and/or categorical representations and the data elements for the bank accounts in the case history database; (e) combining certain ones of the numeric and/or categorical representations to separate the bank accounts in the case history database into a plurality of risk groups, each risk group having an associated probability of charge-off; and (f) optimizing, for each of the plurality of risk groups, a bank profit, by setting overdraft limits.

1 . A method for minimizing overdraft charge-off in a bank account comprising:
 a) identifying a plurality of factors that can result in a bank account charge-off;   b) building a case history account database of bank account holder information based upon a plurality of data elements associated with each of the plurality of factors;   c) creating numeric representations of the bank account holder information for each of the bank accounts in the case history database;   d) tabulating the numeric representations and the data elements for the bank accounts in the case history database;   e) combining certain ones of the numeric representations to separate the bank accounts in the case history database into a plurality of risk groups, each risk group having an associated probability of charge-off; and   f) optimizing, for each of the plurality of risk groups, a bank profit, by setting overdraft limits.   
     
     
         2 . The method of  claim 1  wherein the overdraft limits are set to generate additional reserve for certain bank accounts. 
     
     
         3 . The method of  claim 1  wherein the overdraft limits are set to reduce losses for certain bank accounts. 
     
     
         4 . The method of  claim 1  and further including:
 monitoring the numeric representations, the overdraft limits and bank profits to determine when changes are necessary to the overdraft limits.   
     
     
         5 . A method for minimizing overdraft charge-off in a bank account comprising:
 a) identifying a plurality of factors that can result in a bank account charge-off;   b) building a case history account database of bank account holder information based upon a plurality of data elements associated with each of the plurality of factors;   c) creating categorical representations of the bank account holder information for each of the bank accounts in the case history database;   d) tabulating the categorical representations and the data elements for the bank accounts in the case history database;   e) combining certain ones of the categorical representations to separate the bank accounts in the case history database into a plurality of risk groups, each risk group having an associated probability of charge-off; and   f) optimizing, for each of the plurality of risk groups, a bank profit, by setting overdraft limits.   
     
     
         6 . The method of  claim 5  wherein the overdraft limits are set to generate additional reserve for certain bank accounts. 
     
     
         7 . The method of  claim 5  wherein the overdraft limits are set to reduce losses for certain bank accounts. 
     
     
         8 . The method of  claim 5  and further including:
 monitoring the categorical representations, the overdraft limits and bank profits to determine when changes are necessary to the overdraft limits.