Startup cards can help build credit even in tough times – About Your Online Magazine

While major credit card issuers have tightened loan standards and reduced credit limits in the midst of COVID-19, some financial technology start-ups have taken a different direction.

In 2020, young companies like Grow Credit, TomoCredit and Chime 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 evaluate alternative factors, such as bank accounts and money management, to determine eligibility.

Furthermore, these cards do not have annual fees or even APRs. It is literally not possible to maintain a balance on them.

See how this new generation of credit cards differs from traditional cards and why they are easier to get, even in difficult times.


Traditional credit card issuers typically conduct a tough investigation on their credit report to assess their creditworthiness. Therefore, even before the pandemic, card options were scarce for those with no credit or bad credit (FICO score of 629 or less).

But some new products on the market are not 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 measures revenue, 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 paying for qualifying monthly subscriptions, such as Netflix or Hulu. Subscription services have traditionally not been a factor in their credit reports, but Grow essentially gives cardholders an installment loan that can only be used to charge eligible card subscriptions. Cardholders pay the bill in full each month and accumulate credit along the way.

Paying for cell phone bills can also be done this way, if you are willing to pay a monthly subscription fee from Grow.

“The combination of a small loan that can only be used for a product in need makes our platform very resilient to recessions,” 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 obtain it, you will need to open a Chime Spending account with an eligible direct deposit. You can use it to add money to your secured Credit Builder account, which determines the credit limit for the card.

“Direct depositing definitely helps us understand members’ income and consumption habits in a way that makes this product safer for us to offer,” said Zachary Smith, head of product 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 wins rewards. You must link a qualifying account through a third party service.


These types of cards come with protective grids that can minimize risks for the consumer and the issuer.

On the one hand, you cannot have a balance with these products and, as such, they do not charge interest. The companies behind these cards earn money, at least in part, through interchange fees, which are charged to merchants when they accept a credit card as a form of payment.

Since you are required to pay on time and in full, overspending is difficult or impossible. You and the card issuer may be less concerned about possible default.

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

And free credit cards make it easier to keep accounts open and active, which preserves the extent of your credit history, another factor in your credit score.

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

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


This article was provided to The Associated Press via the personal finance website NerdWallet. Melissa Lambarena is a writer for NerdWallet. Email: Twitter: @lissalambarena.


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