Nerd tip: The credit card described in this article was originally known by the name Petal Visa. In October 2020, it was rebranded as the Petal® 2 "Cash Back, No Fees" Visa® Credit Card. This article has been updated to use the new name for greater clarity.
The Petal® 2 "Cash Back, No Fees" Visa® Credit Card — an alternative card for those with little or no credit — is blossoming into new territory: cash-back rewards. The new incentive, along with the card's lack of fees and nontraditional underwriting, makes it something of a unicorn in the garden of plastic.
Previously, the card offered no rewards. On May 14, 2019, Petal announced that the card's rewards structure will work like this:
You start by earning a flat rate of 1% cash back on everything.
After six monthly on-time payments, your rewards rate bumps up to 1.25% cash back.
The rate rises to 1.5% cash back when you make 12 monthly on-time payments.
Terms and exclusions apply.
Nerd tip: As of October 2020, cardholders will also earn up to 10% cash back when they use the card to make purchases with select merchants.
Beginning in December 2019, card holders could also earn 10% cash back at select merchants.
"When we looked at typical credit card rewards programs, we didn't feel that they match up with the values of Petal," says Jason Gross, co-founder and CEO of Petal. "And so when we thought about crafting our rewards program, it was critical to us that we tie it to responsible financial behavior."
The card does indeed reward good financial behavior, but it also offers leeway. Payments don't have to be consecutive for you to move up to the higher rewards rates. And if you miss a payment, you don't lose your existing earning rate — although Petal notes that cardholders won't be able to redeem rewards if the account is past due.
Why this makes the Petal® 2 "Cash Back, No Fees" Visa® Credit Card unique
On its own, 1% back on all purchases isn't a competitive rate. But it's rare to find rewards at all on cards designed for those with short or nonexistent credit histories. The Petal® 2 "Cash Back, No Fees" Visa® Credit Card also promises the following:
A nontraditional underwriting system: Petal's issuing bank, WebBank, can look at more than just traditional FICO scores to determine creditworthiness. It may use an algorithm that takes into account things like income, savings and spending.
"No fees whatsoever": The annual fee is $0, but the card also charges no late fees, no foreign transaction fees, and no penalty APR (although NerdWallet recommends paying on time to avoid potential damage to your credit scores).
No security deposit: The Petal® 2 "Cash Back, No Fees" Visa® Credit Card is an unsecured product, which means it doesn't require you to pony up a cash deposit as collateral.
A potentially high credit limit: The card offers up to $10,000 of credit for qualified applicants. That's a much higher potential limit than you'll find on competitors in its class.
Reports to all three major credit bureaus: Experian, Equifax and TransUnion.
That's an impressive suite of features for any starter card, and now it earns rewards, too. The 1.5% rate — should you meet the requirements to earn it — is in line with the industry standard for some of the best cash-back cards on the market.
It's worth noting, though, that the Petal® 2 "Cash Back, No Fees" Visa® Credit Card doesn't offer a sign-up bonus, nor does it offer a 0% intro APR period as do many cards in its category. The ongoing APR is 12.99% - 26.99% Variable APR.
Other new features, aside from rewards
Petal is also introducing some new features that will be available on its website and the iOS and Android mobile apps, including a budgeting feature and a card-freezing function. These features complement Petal's existing feature that turns interest into dollar amounts so that you can see the estimated cost of carrying a balance if you don't pay your bill in full.
"You can buy things now with just one click or by talking to your speaker," Gross says. "The easier the world makes it to buy stuff, the more responsible your credit card company needs to be."