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Young adults and the credit industry aren’t exactly peas in a pod, normally. Unestablished credit scan make it difficult for people just striking out on their own to borrow money for the things they need. But that could be changing. A new no-fee credit card called Petal opened to the public this week.
Petal is a startup credit card company based in New York. With the motto, “A credit card with a conscience,” the company’s bold move is that its credit card is designed for people without credit scores. A recent $34 million cash infusion from investors has propelled Petal from a thousands-member trial stage to widespread accessibility for the general public.
Credit card startup Petal aims to help the credit-less
Petal’s staff includes a swath of financial minds with tech know-how from companies like Google, Amazon, WeWork, Square and more. Instead of using borrowers’ personal information to create risk profiles, Petal wants to build your credit based on how you handle your money.
“We use more data than credit history to make credit decisions,” Jason Gross, co-founder and chief exective of Petal, told TechCrunch. “They’re common sense metrics about your finances: How much you make, save and spend every month.”
Petal is certain to appeal to millennials (and likely those who haven’t been in the country for a long time) who want to build a credit history and score. A major benefit is the fact that Petal has no fees — annual, overdraft or otherwise — so you can keep the money you make.
Here’s how Petal works
Petal compiles data from bank information and the payments you make to come up with a credit score for people whose credit is immature. On its website, Petal says “You don’t need credit history to earn our trust. If you have a credit history — that’s great, but even if you don’t, we can use the money you make and the bills you already pay to help you qualify.”
Customers can use Petal’s mobile app to track their spending and take advantage of other money management tools. In a blog post, Petal says, “We show you all of your accounts in one place, send you timely payment reminders to stay on track, and let you automate payments so you never miss a beat. And before you carry a balance past your due date and pay interest, Petal tells you in actual dollars — not just percentage rates — how much it’s going to cost. You won’t find many other credit cards doing that.”
Credit limits for a Petal credit card start at $500 but can stretch to $10,000, which is pretty much unheard-of for first-time borrowers. Variable APRs range from 14.74% to 25.74%, which is a little high, but within the credit industry standards.
As with any credit card, you’ll need to be responsible whether you’re credit report is green or not. Here are some tips on how to keep your credit card in the black:
4 credit card do’s & don’ts
Do pay off your balance every month: Faithfully paying your card off each month will build your credit and save you money (interest), which is how credit issuers make their living.
Don’t skip a payment: This is a well-known practice of credit card companies use to up your interest rate. Don’t fall for it. Always pay your balance every month.
Do check your credit card statements: By dutifully reviewing your credit card statements is the best way to detect descrepancies. The earlier you spot something, the easier it is to get it resolved.
Don’t pay your bills late: And if you do, rather than settle for a late fee, call the credit card company and see if you can negotiate. You’ll be surprised how many people have late fees forgiven by making a phone call.
Credit card commander Clark Howard says one thing that is absolutely necessary is that you always know your interest rate. “Too often, when I ask people what the interest rates are on their credit lines, they have no idea,” he says. Here’s Clark’s advice on why your interest rate is so important.