medium · Asset-Backed Securities

During the 'Controlled Accumulation Period' of a Credit Card Master Trust, what happens to the principal collections allocated to a specific series?

1. They are paid out immediately to bondholders each month in order to shorten the tranches' weighted average life.
2. They are deposited into a 'Principal Funding Account' (PFA) each month to accumulate for a single bullet payment at maturity.
3. They are redirected instead to cover the servicing fee whenever the trust's collected portfolio yield proves insufficient.
4. They are instead used to purchase newly originated receivables from the originator, thereby growing the seller's retained interest stake.

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