Untraditional (Credit) Cards

Last week, Possible Finance announced the launch of the new Possible Card. Possible is a six-year-old startup focusing on lending and financial health for the underserved and lower-income market segment. The new Possible Card is a credit builder card product with unique features and transparent pricing.

The card comes with a $400 or $800 credit limit based on non-traditional underwriting (no hard inquiry FICO check) and the user’s preference in monthly fee ($8 or $16, respectively). The card has no interest fees and has a pay-over-time installment alternative for any balance separate from the standard 30-day cycle. Coastal Community Bank issues the card.

I could not find the complete cardholder agreement and terms and conditions on the Possible site without downloading and completing a full signup for the Possible loan app, which was a step too far for me. I recommend the compliance team includes a link to the terms on the main marketing page.

An $800 credit limit for $16 per month and no FICO check (the company will still need to verify your ability to repay the limit based on your income, per Federal regulations) with 0% interest, no late fees, and the ability to pay over time is a very impressive, consumer-friendly offering. I have no idea how you make money on that. The company’s blog post makes the case that credit cards are a lot like payday loans, trapping people in a debt cycle. They certainly can do that, but the losses at $800 on a revolver can be quite high; plus, cards introduce additional losses and expenses around actions like fraud and cardholder disputes that aren’t the same in a direct cash disbursement loan.

The Possible card is the latest entry in many new card products that aim to help consumers build credit without a traditional approach to the subprime or thin-file customer (those without a credit history). Other players in the space include Grow Credit, Extra Card, Super’s Cash Card, and Tomo Credit. Each of these products has a unique twist.

Grow Credit is a debit Mastercard that charges a monthly fee for a low monthly limit designed for consumers to pay for their subscription services. A corresponding loan is opened at MRV Banks to create credit history as consumers pay back their monthly subscriptions. Limits start at $17 per month for a free account, up to a $150 spending limit for a $9.99 monthly fee.

Extra is a debit Mastercard that links a connected checking/debit account at your existing bank to a credit-building program for a monthly fee (which is not currently disclosed on the marketing site). Extra gives users a spending limit that can grow over time with behavior and the value of the linked account. Extra covers your transaction on the card upfront and then debits that same amount from your account the next day, using that as a repayment. Patriot Bank, N.A., issues the card.

Super’s SuperCash™ Mastercard® is a secured credit card product issued by MRV Banks. The card is secured by cash in a deposit account paired with the card established at MRV. The card has a monthly fee, again not disclosed on the site.

Tomo Credit is a charge card, which means you cannot carry a balance. The card is underwritten on cash flow and issued by Community Federal Savings Bank. Users need to pay back their balance weekly, designed to provide higher limits for the consumer while reducing risk for Tomo.

These are just some of the products in the market. Fintech issuers like Petal also use alternative underwriting to target this segment but use a traditional approach to credit limits, fees, and repayment schedules.

I applaud these companies' efforts to create new products that innovate in the space to help consumers gain access to and build credit over time. As noted above, there is an opportunity for increased transparency in pricing. The language of “it’s like a credit card, but it’s not” is very challenging to describe, and consumers should not have to start a sign-up process to get clear access to terms, agreements, and pricing.

What’s unclear (and will be for quite some time) is if these cards can generate actual behavioral change in their users. Credit building only works if you pay on time, and although these cards are built with structures that encourage proper repayment behavior, once the training wheels come off and users migrate to a standard unsecured card, they must continue that behavior. Otherwise, it’s all a lot of work for nothing.

Financial, Physical, and Mental Wellness

I’ve written about new cards in the wellness space. Paceline was the first to market with an integrated rewards experience around exercise and a credit card rewards product. Railsr’s US credit-as-a-service platform powered Paceline’s original card product. Railsr became insolvent earlier this year and closed its US card programs.

I also covered Ness*, which launched to the public earlier this year with a premium charge card with accelerated health and wellness spending rewards (including points for your activity and sleep tracking). Ness aims to be an Amex Platinum for the wellness crowd and has compelling partnerships and offers for products from Warby Parket to Sweetgreen. The Bank of Missouri issues the Ness Card.

One piece of credit card news I missed was last year’s launch of the KrowdFit Mastercard, powered by Deserve’s credit-cards-as-service platform and issued by Celtic Bank. The card has high earnings rates and no annual fee, but based on the company’s homepage rendering problems, it is not clear the program is working. Krowdfit is a fitness platform where tracking leads to entries in monthly giveaways.

These cards have a different take on encouraging wellness and underlying infrastructure for their payment products but with a similar underlying purpose of promoting and engaging personal wellness through personal finance. Competition is good: it shows interest in the category and product space. I'm confident that one or more wellness credit cards will be successful.

Cobranded Card Thoughts

As part of my new consulting business, Totavi, I am pleased to share that I am working with Cardless,* a fintech cobrand card issuing platform, writing a series of posts on their corporate blog. You can read my first post on why brands should consider cobrand credit cards over at Cardless. Enjoy!

CardsFTW

Thanks for reading CardsFTW, an occasional debit and credit newsletter written by Matthew Goldman. Matthew is the founder of Totavi, LLC, a boutique startup product and consulting firm. Learn more about him on LinkedIn and visit totavi.com.

* Indicates a company with whom Matthew Goldman or Totavi, LLC has an existing or prior financial relationship.