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There’s a new wave of "alternative" credit cards — products from startup issuers that are exploring different ways of evaluating creditworthiness beyond traditional FICO scores and credit history. Among such products, the Grow Credit Mastercard stands out.
Offered by the Grow Credit startup and issued by Sutton Bank, the card allows customers to choose one of four membership plans that help them build credit through qualifying subscriptions or bill payments. This is not an option found on typical credit cards.
Other noteworthy features include:
No security deposit for most membership plans.
No interest charges.
No credit check.
Given its unique structure, the card does have some limitations that may not be a match for everyone. For instance, you won't be able to carry a balance, and your spending power will be low.
Here’s are five things to know about the Grow Credit Mastercard.
1. No credit check is required, but you’ll have to link a bank account
There will be a "soft" credit check for identification purposes, which won't affect your credit scores. But instead of relying on a hard inquiry on your credit reports — which is common among most credit card companies when they evaluate applications — Grow Credit has its own proprietary technology that can look at income to determine creditworthiness, according to Joe Bayen, CEO and founder of Grow Credit.
One way the company does this is by requiring access to your bank account information through Plaid, a third-party service. The company’s website says credentials are not shared with it, nor are they stored on its servers.
The lack of a credit check makes the card ideal for those with no credit or poor credit (FICO scores of 629 or below) who want to establish a credit history without the risk of taking on debt.
2. You can build credit with qualifying bills or subscriptions
Payment for subscription services isn’t generally factored into your credit reports, but here's how the Grow Credit Mastercard makes it work:
It offers a traditional line of credit that allows you to establish credit as you pay for qualifying monthly subscriptions that include eligible bills, TV, music and other streaming services. You pay off the bill in full each month and build credit in the process. Previously, the issuer reported the card as an installment loan on your credit report.
The virtual card is tied to one of four membership plans, depending on your eligibility. These plans allow you to build credit with qualifying subscriptions, each with a different limit. The pricing of membership plans may vary with different promotions. The company will let you know which plans you’re eligible for, and you can make the final selection, but the membership tiers are as follows:
"Build" membership (free): This plan offers a $17 monthly spending limit on subscriptions like Netflix, Hulu, Spotify and Pandora, to name a few. Applicants need to have direct deposits of at least $1,200 per month (for at least two months) to qualify for this free plan, according to Bayen.
"Secured" membership ($2.99 per month): Those who can't qualify for the free "Build" membership plan may be eligible for this option if they meet certain requirements. Applicants must have a bank account that's older than 30 days and it must contain a minimum of $1. To cover the $17 monthly spending limit, this plan also requires a security deposit for that amount. The security deposit is returned after 12 months of consecutive on-time payments.
"Grow" membership ($4.99 per month): The Grow membership offers a $50 monthly spending limit and access to “premium” subscriptions that include payments at Verizon Wireless, AT&T, Sprint, T-Mobile and Coursera.
"Accelerate" membership ($9.99 per month): This plan offers a $150 monthly spending limit toward these same premium subscriptions.
The extensive list of eligible subscriptions includes JustFab, Dollar Shave Club, HBO Now, HBO Max, PlayStation Plus, Xbox Live, ESPN+, CBS, Showtime, iHeartRadio, Amazon Prime, Disney+, MasterClass, YouTube Premium, Starz and DirecTV, among others.
“Applicants need to have direct deposits of at least $1,200 per month (for at least two months) to qualify for the free plan, according to Bayen.”
Among the four plans, the free plan is the best option if you qualify. Otherwise, you’re paying an annual cost of about $60 for the Grow membership plan and nearly $120 for the Accelerate membership plan. (These rates are accurate for the ongoing membership plan costs. Prices may vary with different promotions.) In that case, you’re better off saving up to pay the security deposit on a secured credit card because you can get that money back after you close the card if you maintain a good payment history.
3. It has a low spending limit
The monthly spending limit on the Grow Credit Mastercard can only be used to pay for subscriptions included in your membership plan.
The monthly spending limit is different for each membership plan, but it’s only a fraction of the card’s credit limit. For instance, with the free membership plan, you can only spend up to $17 per month, but your limit on the card is $204.
4. You can’t carry a balance, so there’s no APR or fees
With the Grow Credit Mastercard, carrying a balance from one month to another is impossible. You can only charge the eligible subscriptions to the card up to your available monthly spending limit. As a result, Grow Credit charges no interest or fees whatsoever. Grow Credit makes its money through interchange fees and the cost of the paid membership plans.
Since you’re required to pay on time and in full, you can’t fall into a debt cycle with this card. Its sole purpose is to help you build credit.
5. It reports to all three credit bureaus
Payments are reported to all three major credit bureaus — TransUnion, Equifax and Experian — which are the companies that record the information used to calculate your credit scores.
Payments are reported as a revolving line of credit. Previously, they were reported as an installment loan. A card that reports payments to all major credit bureaus is a must-have when building credit is your goal.
See how this card stacks up against the best credit card offers on NerdWallet.