Building a credit history can be difficult, especially if you’re young, and classic strategies can be expensive and cumbersome. Fortunately, new fintech companies have started adding services that can help you build up that credit without costing you a fortune or requiring massive security deposits.
They are able do this because they build up a relationship with you and have a better understanding of your finances. Classic secured credit cards achieve this by requiring multi-hundred dollar deposits – they aren’t taking risk because they’re holding onto a $500 security deposit!
Chime, a financial technology company, offers Chime accounts that operate similarly to a checking and savings account. They are able to use that information to offer a secured Chime Credit Builder VISA card that operates like a secured card.
Want to see how this can help you build credit? Read on.
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Who is Chime?
Chime is a fintech company that works with The Bancorp Bank to offer banking services. Bancorp Bank is FDIC insured (FDIC #35444) and is actually the bank behind many fintech startups’ banking offerings. They power over a hundred other non-bank services.
Chime offers three products:
- Spending Account – This is a fee-free (no monthly or maintenance fee) account that has a Visa debit card to facilitate your spending needs. It’s similar to a checking account though it added benefits like the ability to round up transactions into your savings (if you charge $1.50, they will transfer 50 cents from your spending to savings account).
- Savings Account – This is a fee-free savings account that offers interest similar to other high yield savings accounts.
- Credit Builder – This service it the focus of this review but the Credit Builder is a secured visa card issued by Stride Bank, N.A. and has the ability to help you build credit.
What is the Chime Credit Builder Card?
The Chime Credit builder card is a secured Visa credit card that you can get without a credit check. Unlike many other secured credit cards, there is no security deposit if you have an eligible direct deposit – which is a direct deposit of $200 or more into your Spending Account within the last 365 days.
This qualifying deposit must by from an employer, payroll provider, or benefits payer by Automated Clearing House (ACH) deposit. It can’t be a transfer from something like PayPal or Venmo.
If you don’t have this, then you will have to provide a Security Deposit, which is standard for secured credit cards.
How the Chime Credit Builder Card Works
When you open a Chime Credit Builder account, you are getting a secured card that is tied to a Credit Builder Secured Account. You need to transfer funds into that secured account, either through automatic transfers or manually, and that balance is how much you can spend with your card.
This is not, however, a security deposit. It secures your card but it’s not locked away in the bank’s coffers somewhere, you can see it. You can transfer it out as long as it’s available.
When you charge your card, Chime will put a hold on those funds in your secured account. If you turn on “Safer Credit Building,” Chime will automatically pay your monthly balance using the secured funds (it’s basically autopay). If you don’t turn it on, you have to do it manually.
The account charges no interest and requires you to pay it off each month.
How Chime Credit Builder Builds Credit
It’s a secured credit card so Chime will report your behavior to all three credit bureaus – Equifax, Experian, and TransUnion. It works just like every other secured credit card, which is what many Americans use to build or rebuild their credit history.
The Chime Credit Builder Card doesn’t have a pre-set limit but is limited by the amount you put into your secured account. Chime doesn’t report utilization so it won’t impact your score in that regard. It will report your payment behavior and on-time payment is important in your credit score.
Chime Credit Builder Pricing
The Chime Credit Builder card has no annual fee and charges no interest. The only requirement is that you have a Chime Spending Account too – but that has no monthly or account maintenance fees.
The only cost is if you do not have a qualifying direct deposit, then you will have to make a security deposit. The cost is whatever interest you would’ve earned on that balance, which given current interest rates isn’t much.
Chime Credit Builder Alternatives
You can always turn towards secured credit cards but they often require a large, several hundred dollar, security deposit. If you have no history, you can always try a low limit store branded credit card.
If you’re looking for an all in one banking services provider that has a Spending account, Saving account, and Credit Builder product – I’m not sure there’s a perfect alternative out there.
Here are a few similar ones that offer the ability to build credit:
Extra Debit Card
Extra just offers a debit card that links to your existing bank, through Plaid, with a spending limit based on your bank’s account balance. You use the debit card and then a day later, they pay off the transaction from your bank account. At the end of each month, they report your total purchases that month as payments to Equifax and Experian. They do this all for a annual fee that starts at $149 or $20 a month.
Self Credit Builder
Self, formerly Self Lender, offers a Credit Builder Account* where you make monthly payments to build credit history and build savings. Your monthly payments get reported to the three major credit bureaus, and once you’ve made three on-time payments, saved more than $100 in your account and have your account in good standing, you can use your savings as a deposit for a Visa® secured credit card.**
This gives you several ways to build up your credit. Our full review of Self explains more.
Self requires a $9 non-refundable administrative fee up front, but you can unlock the savings you build at the end of your plan – minus interest and fees.***
Grain is a service that will look at your checking account and pre-approve you for a line of credit. Their tagline is that they use your cash flow and not your credit to determine creditworthiness. Their max line is $1,000 – which is a solid maximum. Then, you use Grain as your credit card and they report your behavior to the credit bureaus. If they determine your cash flow can’t support an unsecured line, they will issue one with a security deposit.
Is Chime Credit Builder Worth It?
If you are looking to build credit and can’t seem to get approved for a traditional credit card, I think this is a very good option. This review focused on the Credit Builder card but our Chime review discussed their Spending and Savings accounts, which are also pretty good if you’re looking for a new bank.
Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Please see back of your Card for its issuing bank.
*All Credit Builder Accounts made by Lead Bank, Member FDIC, Equal Housing Lender, Sunrise Banks, N.A. Member FDIC, Equal Housing Lender or Atlantic Capital Bank, N.A. Member FDIC, Equal Housing Lender. Subject to ID Verification. Individual borrowers must be a U.S. Citizen or permanent resident and at least 18 years old. Valid bank account and Social Security Number are required. All loans are subject to consumer report review and approval. All Certificates of Deposit (CD) are deposited in Lead Bank, Member FDIC, Sunrise Banks, N.A., Member FDIC or Atlantic Capital Bank, N.A., Member FDIC.
**The Self Visa® Credit Card is issued by Lead Bank, Member FDIC, Equal Housing Lender, or South State Bank, N.A., Member FDIC, Equal Housing Lender.Requirements are subject to change. All requirements are subject to change.
***Sample loans: $25/mo, 24 mos, $9 admin fee, 15.92% APR; $35/mo, 24 mos, $9 admin fee, 15.97% APR; $48/mo, 24 mos, $9 admin fee, 15.72% APR; $150/mo, 24 mos, $9 admin fee, 15.88% APR. See self.inc/pricing