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These are golden times for people who want to fix past credit issues or establish a credit history from the beginning. Options abound, from standard secured credit cards to specialized loans from credit unions. One of the latest products on the scene is the Chime Credit Builder Secure Visa Credit Card, which is a type of hybrid debit and credit card. To find out if the Chime credit card is right for you, understand how it works.
Chime vs traditional credit card issuers
Most credit card issuers are direct lenders. When you make a charge with one of their cards, they lend you money. Chime Financial, headquartered in San Francisco, however, is not a bank but a fintech company.
Chime contracts with other financial institutions and businesses to provide services. The Chime Credit Builder card is issued by Stride Bank, while the Chime checking account, which you will need to open the credit card, is through Bancorp Bank and Stride.
Since Chime is also a Visa partner, you can use the Chime Credit Builder Secure Visa Credit Card anywhere Visa credit cards are accepted.
How the Chime Credit Builder card works
So, is Chime a credit card or something else? The Chime Credit Builder card is a secure credit card with a twist. Instead of depositing a specific amount of money as a security deposit that remains with the issuer until you close the card or it is transferred to an unsecured account, the money in your account current Chime secures the card.
Here are the steps to start the account, all of which are completed on the Chime website.
- Open a Chime current account. There are no monthly fees for this account and you can use it like any other checking account. To be eligible for a Chime Credit Builder card, you must receive a qualifying direct deposit – usually a paycheck – of at least $200 in the past year.
- Choose “credit creator.” After opening the current account, you can register for “Credit Builder” and fill out the online form.
- Fund your card. Move the amount of money you want to charge the card from your checking account to your credit card account. This will be your card limit.
You will receive a Chime Credit Builder card in the mail. You are free to use it anywhere Visa is accepted (pretty much anywhere credit cards are accepted). Chime will withdraw the money from your secure account and automatically pay your monthly fees in full. This way, you can’t carry over a balance like you would with any other type of credit card.
To ensure you always have funds available for your card, you can sign up for “Move My Pay”, a feature that automatically transfers any amount you choose from direct deposits to your Chime Credit Builder account.
How the Chime Credit Builder Card Affects Your Credit
In most cases, when you apply for a credit card, the issuer will perform a thorough credit investigation to determine qualification. However, there is no credit check for a Chime Credit Builder card. A difficult investigation will not be placed on your credit file, which may temporarily lower your credit score.
Once you have the card, Chime will report your monthly payment activity to the three major credit bureaus, TransUnion, Equifax and Experian. Since payment history is the most important factor in a FICO score, the more on-time payments you have listed on your credit report, the better.
What Chime does not do is report credit usage to the bureaus. In effect, you are using your own funds and not technically borrowing money from a set line of credit. Therefore, you never have to worry if your balance is too close to the credit limit, which can negatively affect your credit utilization rate.
Benefits: Chime Credit Builder Card Fees and Terms
This map has a number of particularly positive aspects, including:
- No additional interest. Since you are using your own money and repaying the amount you spend with money from your checking account, there is no revolving debt. This means interest is not added to anything you buy.
- No annual fees. Unlike some secure cards designed for people low credit ratings or credit not established, this card does not charge an annual fee.
- No strict credit limit. Traditional credit cards have a fixed credit limit, but this card does not. The money you transfer into your secure credit builder account sets your spending limit, so it’s entirely in your control. Whether your account has $200 or $2,000, that’s your limit.
If you want to make sure you never fall into expensive credit card debt when you bill, this card may work well for you. It provides convenience and security when building a credit score.
Cons: What the Chime Credit Builder Credit Card Misses
The Chime Credit Builder card has some disadvantages, including:
- No reward. Many cards for beginners and credit rebuilders have rewards programs which allow you to earn money or points while you charge. Some also have a registration bonus which offers cash or points when you charge at least a fixed amount shortly after opening the card. This card has not either.
- No additional payments. Maybe you want the flexibility to buy something expensive and pay over time because you don’t have the cash on hand to cover the full cost. You will not have this option with your Chime card.
- None of the advantages. Some credit cards offer many advantages, such as mobile phone insurance, trip protection, free checked bags on flights, hotel room upgrades and discounts on streaming services. This card does not.
If you’re looking for cards with at least some of these features, you’ll have to look elsewhere.
For instance, Discover it Secure credit card offers 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, and 1% cash back on everything else.
If you are in college, the Chase Freedom Student Credit Card may be preferable. You’ll earn 5,000 bonus points, redeemable for $50, after making your first charge within three months of account opening, and 1% cash back on everything you charge.
A credit builder loan with a credit union can also be helpful. Rather than getting the loan amount up front, you first make the payments, which are noted on your credit report. And if you’re more interested in building your credit history without any credit cards, you might want to consider signing up for Experian Boost program. With Boost, you can add your utility and cell phone accounts to your credit report. These one-time payments will show up and be factored into your credit scores.
Conclusion on Chime Credit Generator Card
If you want a credit card that you can never overspend or rack up expensive debt with, the Chime Credit Builder card might make a lot of sense. As you use it, you can grow or improve your credit score, as your regular payment pattern will be recorded in your credit file. Then, when your credit score is higher, you will have the option of opening an unsecured credit card with a wide range of useful and valuable features.