A secured credit card is designed for those who are new to credit or have had credit issues in the past. These cards provide a chance to build trust with lenders and improve scores.
With no credit check required and 1.5% cash back rewards for spending available, this offering from Chime compares favorably to other secured cards on the market.
Does this sound like a fit for your wallet?
Team Clark has all the information you’ll need to make an informed decision on whether this credit card makes sense for you.
Chime Cash Rewards Visa® Credit Card: The Basics
The Chime Cash Rewards Visa® Credit Card is a secured credit card that offers unlimited 1.5% cash back rewards on select spending categories.
Chime is in the early stages of rolling this card out, so access to it may be limited. You’ll be required to have a Chime Checking Account and make a qualifying direct deposit to apply for this card.
This card has no annual fee and charges no interest on purchases. But since it is a secured credit card, your spending power will be limited to the amount of money that you deposit to a corresponding Chime Checking Account.
Chime will report your activity on this card to all three major credit bureaus, so it is possible to build or repair your credit with this card without risking going into credit card debt.
Chime Cash Rewards Visa® Credit Card: 5 Things To Know
If you’re considering adding this card to your wallet, here are five things you’ll want to know:
1. This Card Isn’t Available To Everyone… Yet
If this card seems too good to be true, that may actually be the case for many consumers at this time.
When you go to the homepage for this credit card, you’ll notice that there is no “APPLY NOW” button. Instead, you’ll see the opportunity to submit your email address to receive more information about applying.
This is because Chime has not yet fully unleashed this card. Currently, it is limiting this card to a small population of test users.
The following message is posted on Chime’s website:
The Chime Cash Rewards Visa® Credit Card is a new card we’re testing within a small population, and is not yet widely available. If you’re interested in increasing your chances of being included in new offers, try the following:
- Monitor and boost your FICO® Score with Experian Boost®. Learn more at: https://www.chime.com/blog/new-grow-your-fico-score-inside-the-chime-app/
- Build credit with everyday purchases using our Chime Credit Builder Visa® Credit Card*. Learn more at: https://www.chime.com/credit-builder/
If you’re not one of the lucky ones who get to use this card right away, you may want to consider the Chime Credit Builder Visa® Credit Card instead. This card is on our list of best secured credit cards and is more widely available.
2. The Cash Back Rewards Rate Is Good for a Secured Credit Card, But There’s a Catch
Money expert Clark Howard typically advises consumers to carry a no-annual-fee credit card in their wallet that returns 2% cash back on everyday purchases. That way you know you’re getting a set rate of return on all your purchases.
This card falls a little short of that, but that’s to be expected with a secured credit card. The 1.5% cash back offered by the Chime Cash Rewards Visa® Credit Card actually ranks among the best rewards available on a secured credit card.
However, there is an important caveat. While the marketing on this card says “unlimited 1.5% cash back,” be aware that it also says the spending categories in which you’ll be able to earn that cash back will rotate.
The current spending categories eligible for 1.5% cash back will be displayed in your Chime app. Your balance for earned rewards will update weekly on the app.
3. There’s No Credit Check Required To Apply, But There Are Other Requirements
Unlike most credit cards on the market, you won’t need a hard pull on your credit to successfully apply for this credit card.
That’s a big deal for people who are trying to build or repair their credit score. After all, the last thing you need while trying to improve your score is a ding for a credit inquiry.
But there are some extra hoops you’ll have to jump through in place of a credit check to get this card:
- You’ll need a Chime Checking Account. These are free to set up and do not have monthly fees.
- You’ll need to make a qualifying direct deposit. This must be $200 or more from one of the following: “your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT).”
Note that Chime is a financial technology company, not a bank. The banking that you’ll do through a Chime Checking Account is provided by The Bancorp Bank, N.A. or Stride Bank, N.A. Both are FDIC insured.
4. You Won’t Owe Interest, But Your Spending Power Is Regulated By Your Deposits
The good news about this card? You can’t run the risk of racking up interest charges on your spending.
The bad news? You’re basically borrowing from yourself, so the spending power you’ll receive with this card can be limited.
Let me explain.
Secured credit cards are designed to allow you to prove that you’re capable of borrowing money and paying it back each month. That usually means that the card issuer is going to want you to hand over what amounts to a security deposit to protect them.
Some secured card issuers make you hold that money separate from your spending power, but Chime actually makes it available to you in your card’s spending power.
So as a part of that process, you’ll be required to make deposits into your Chime Checking Account to create spending power for your Chime Cash Rewards Visa® Credit Card.
For example, if you deposit $1,000 into your Chime Checking Account you can expect that you’ll have that much spending power on your secured credit card.
This protects Chime as you prove to them that you’re a worthy borrower, but it also protects you from overextending yourself with credit card spending that you can’t actually afford. That keeps you away from high balances and subsequent interest owed like you’d have with a traditional credit card.
5. Your Positive Behavior Will Be Reported to the Credit Bureaus
While it may be disappointing that you have to provide collateral in order to have spending power with this credit card, you can take solace in knowing that your responsibility won’t go unnoticed.
Chime says that it reports your activity to all three major credit bureaus: TransUnion, Experian and Equifax.
Using a secured credit card like this helps you build a positive history on things that impact your credit score like:
- Making on-time payments
- Establishing or extending the length of your credit history
- Adding a new element to your credit mix
And if you’re worried about your utilization ratio being too high if you spend a high percentage of your available money, Chime has you covered there, too:
“We don’t report percent utilization to the major credit bureaus because both Credit Builder and Cash Rewards don’t have pre-set limits. That means spending up to the amount you added will not show a high-utilization card on your credit history. So rest assured to use Credit Builder or Cash Rewards for your everyday purchases and let them count towards credit building!”
While the exact impact this new card can have on your actual credit score will vary from user-to-user, Chime has claimed success with its closely aligned Credit Builder credit card. It says the average Chime member sees a 30-point increase in their credit score after approximately eight months of using the Credit Builder card.
Do you have experience with Chime? What about secured credit cards? We’d love to hear your experiences and recommendations in the Clark.com community.