Starter cards remain open to credit builders


While major credit card issuers have tightened lending standards and reduced credit limits amid COVID-19, some fintech startups have taken a different approach.

In 2020, start-ups like Grow Credit, TomoCredit, and Chime have launched or expanded credit cards that are available to those with less than ideal credit because they do not perform any credit checks. Instead of relying on the traditional FICO credit scoring model, these “fintech” products can assess alternative factors such as bank accounts and money management to determine eligibility.

Moreover, these cards do not have an annual fee or even an APR. It is literally not possible to carry a balance on them.

Here’s how this new generation of credit cards differs from traditional cards and why they’re easier to get, even in tough times.


Traditional credit card issuers usually do a thorough investigation of your credit report to assess your creditworthiness. Therefore, even before the pandemic, card options were slim for those with no or low credit (FICO scores of 629 or lower).

But some new products on the market aren’t as concerned with your credit report as they are with other facets of your financial life.

Grow Credit, for example, offers the Grow Credit MasterCard, issued by Sutton Bank. The company has proprietary technology that assesses earnings, according to Joe Bayen, CEO and Founder of Grow Credit. Applicants must provide access to their bank account information.

The card allows you to accumulate credit when you pay for eligible monthly subscriptions like Netflix or Hulu. Subscription services aren’t traditionally factors in your credit reports, but Grow essentially gives cardholders an installment loan that can only be used to charge eligible subscriptions to the card. Cardholders pay the bill in full each month and accumulate credit along the way.


Cell phone bill payments can also be processed this way, if you’re willing to pay a monthly Grow membership fee.

“The combination of a small loan that can only be used for a product of necessity makes our platform very recession proof,” Bayen said in an email.

Or consider the Chime Credit Builder Visa Secured credit card, issued by Stride Bank, which also does not require a credit check. To get it, you’ll need to open a Chime spending account with eligible direct deposit, and the balance in that associated spending account usually determines your credit limit on the card.

“Direct deposit certainly helps us understand members’ income and spending habits in a way that makes this product safer for us to offer,” says Zachary Smith, Chief Product Officer at Chime.

TomoCredit offers the Tomo card. The startup’s technology allows its issuer, Community Federal Savings Bank, to determine card eligibility based on several factors, including income and account balances. The card also brings rewards. It is necessary to link an eligible account via a third-party service.


These types of cards come with safeguards that can minimize risk to both the consumer and the issuer.

For one, you cannot hold a balance with these products and as such they do not charge interest. The companies behind these cards make money at least in part from interchange fees, which are charged to merchants when they accept a credit card as payment.

Since you are required to pay on time and in full, overspending is difficult, if not impossible. You and the card company can be less worried about a potential default.

In addition, payments are reported to the three major credit bureaus: TransUnion, Equifax and Experian. (The Grow MasterCard is reported to credit bureaus as an installment loan.) These bureaus record the information used to calculate your credit scores. Good scores of 690 or higher can save you money on interest rates for a car, home, or other credit cards.

And no-fee credit cards make it easier to keep accounts open and active, which preserves the length of your credit history, another factor in your credit scores.

For 46-year-old Minnesota resident LaToya Wilson, the Chime Credit Builder Visa Secured credit card allows her to rebuild credit without the risk of credit card debt and get closer to buying a home. She got the card in 2020.

“This time I’m more careful about what I do and (where) I spend,” Wilson says. “I see my credit score going up every month using it.”

This article was provided to The Associated Press by personal finance website NerdWallet. Melissa Lambarena is a writer at NerdWallet. Email: [email protected] Twitter: @lissalambarena.


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