@article {Desear23, author = {Edward M. Desear}, title = {Credit Card Structures and their Ability to Weather Hard Times}, volume = {14}, number = {1}, pages = {23--27}, year = {2008}, doi = {10.3905/jsf.2008.706229}, publisher = {Institutional Investor Journals Umbrella}, abstract = {When the basic credit card securitization structure was first rolled out in 1987, it was viewed as quite complex and innovative. Many improvements have been layered onto that structure since then, and the structure seems to have served both issuers and investors well. Its dynamic, self-correcting features are designed to allow it to absorb spikes in credit losses or decreases in the rates or fees charged to cardholders. These structures leave much of the risk of credit loss with the credit card bank and its affiliates. The assets placed in a securitization trust consist of all the rights to receive payments made by a specified group of cardholders. The bank issuing the credit card remains the owner of the actual credit card account with the customer. The securitization trust may deal with seasonal variations in aggregate account balances by commercial paper conduit financing, but also may hedge against changes in the availability and expense of short-term funding by issuing long-term securities. In a credit card master trust, all outstanding master trust securities, regardless of when they were issued, share in any poorly performing test origination of accounts, thereby diluting the impact of a period of origination of particularly risky accounts on any particular master trust investor. The most important structural protections for investors are rapid amortization triggers, the locking of the principal allocation percentage during amortization, subordinate securities and interests, and reserve funds, which in this case are generally known as {\textquotedblleft}spread accounts{\textquotedblright} and {\textquotedblleft}cash collateral accounts.{\textquotedblright}TOPICS: Security analysis and valuation, fixed income and structured finance}, issn = {1551-9783}, URL = {https://jsf.pm-research.com/content/14/1/23}, eprint = {https://jsf.pm-research.com/content/14/1/23.full.pdf}, journal = {The Journal of Structured Finance} }