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Money added to a Credit Builder will be held in a secured account as collateral for your card, giving you access to a line of credit. There's no upfront deposit required, but you will need to have a Chime Spending account open with an eligible direct deposit in order to qualify.
It starts to get difficult to keep track of all the new bank-like entities popping up trying to lure your money into their well-funded venture capital wallets. We can say that Chime does set itself out from the pack a bit through its track record and commitment to low fees.
Chime was founded in San Francisco in 2013 as a mobile app for banking products with no fees. In an age of startups, they are practically grandparents at just under 10 years old. As recently as 2020, Chime was able to raise $485 million in funding, giving them a company valuation of $14.5 billion during the middle of a pandemic.
Chime is not a bank. They are a financial technology company, or "fintech". Instead, Chime relies on two partner banks to issue their products. The first partner, The Bancorp Bank, has been assisting fintechs with issuing products for over 20 years. Chime's second partner, Stride Bank, has been operating for over 100 years.
The Chime Credit Builder Secured Visa card offers a number of attractive features that set it apart from similar products.
For starters, it doesn't require a hard credit pull to get approved. This is an excellent perk for those looking to safeguard their credit score. Hard credit inquires can cause a temporary dip in your score, but can also have long-lasting effects and make it harder to get approved for additional cards if your initial application is declined. Once an account is open, activity is reported to the three main credit bureaus. Chime reports that members see an average increase of 30 points to their score.
Chime is also light on fees. The card charges no annual fee. Similar secured cards, like the OpenSky Visa, charge annual fees ranging from $25 - $100. Those desperate for credit are often looking to overlook an annual fee in exchange for an opportunity to build credit. The biggest plus here is the lack of an interest rate. That's right. Each month, your bill is paid using available funds in your Credit Builder. Since you cannot carry a balance, you cannot incur interest. This is in sharp contrast to other cards that can charge more than 25% interest.
Let's take a closer look at that security deposit feature. To open a Chime Credit Builder Secured Visa card, you'll deposit money into a Credit Builder. The funds in this account will be used as collateral against the purchases you make throughout the month. At the end of your billing cycle, funds will pay off the balance. How does this look in practice? If you have $300 in your Credit Builder and make $100 in purchases throughout the month, your next month's available line of credit will be $200. You may add additional funds to your Credit Builder at any time. It's almost like a checking account that reports to the credit bureaus. Almost.
These are fairly minor if you're in need of credit building, but they are important to consider.
First, this card can not graduate into an unsecured card. This is problematic for one reason - the length of your open accounts makes up 15% of your credit score. This means that you'll likely want to close the Chime card in exchange for an unsecured credit card at some point in the future. Doing so will impact your score later, but hopefully you've built enough history that the damage will be minimal. Since the card has no annual fee, there's also no harm in keeping it open.
The second is even less significant, but this card does not offer rewards. Competing offers, like the Petal 1, offer some rewards. Over the course of a year, the amount of rewards is likely to be negligible. Someone that spends $500 a month on another card might expect $60 in rewards each year.
This is simple. You don't need a credit score to get the Chime Credit Builder Secured Visa.
There's always a catch. In order to open the secured card, you'll need to have a Chime Spending Account. Additionally, you'll have needed to have had qualifying direct deposits of $200 or more made into the Spending Account within the past 365 days. This may not be a huge blocker, but it may mean you aren't able to open a secured card until after your first direct deposit. This means no instant gratification.
There's no good way to say this. People are confused by the Credit Builder account and how it works. Luckily for you, you're one step ahead of the game by reading this review. Just remember, you need to have a Spending Account to open the secured card. Your Spending Account will be used to move funds into a Credit Builder account, which is the collateral for your Chime Credit Builder Secured card.
"How is this different from a debit card" is a common question on Reddit. The answer is easy. The secured card reports to the credit bureaus, allowing users to build credit. Debit cards do not offer this feature. Many are off put that there isn't a traditional line of credit, however, we think this is a great perk for those looking to build credit and better money habits.
If you're either already using a Chime Spending Account, or if you're interested in replacing your current checking account with one, we think this could be a great option. The low fee structure, lack of interest, no credit check and the inability to accrue more debt as you try to build your credit profile all make this appealing for those with credit scores that are less than average.
However, if you're happy with your existing bank, or if your credit score is fair (600-650), we might recommend going through the prequalification process for a Petal card to explore your options.
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