Petal 2 Credit Card Review: A Fee-Free Credit-Building Alternative

The Petal® 2 "Cash Back, No Fees" Visa® Credit Card may be an ideal option if you want to avoid fees as you start the clock on your credit history. Unlike many starter cards, no security deposit is required, nor will you pay an annual fee to hold the card.

Plus, Petal's issuing bank, WebBank, can look at more than just traditional FICO scores to determine creditworthiness. The bank has an algorithm that can take into account things like income, savings and spending. The card even offers a cash-back rewards program comparable with those on cards for people with good to excellent credit.

So if you're looking for help in building your credit while also earning rewards for your healthy habits, the Petal® 2 "Cash Back, No Fees" Visa® Credit Card seems legit.

Petal® 2 "Cash Back, No Fees" Visa® Credit Card: Basics

Card type: Starter and alternative.

Annual fee: $0

Security deposit: None.

Rewards: Up to 1.5% cash back on all purchases. Details:

• You start by earning 1% cash back on all purchases.

• Make six monthly payments on time, and your rewards rate rises to 1.25% cash back.

• Make 12 monthly payments on time, and the rate rises to 1.5% cash back.

Plus, up to 10% cash back when you use the card to make purchases with select merchants.

APR: The ongoing APR is 18.24%-32.24% Variable APR.

Penalty APR: None.

Credit limit: $300 to $10,000, depending on creditworthiness.

Foreign transaction fee: None.

Other perks:

• Payments reported to three major credit bureaus, TransUnion, Equifax and Experian.

• Account management and budgeting tools via the app (iPhone and Android) or mobile-optimized website. For instance, before making your monthly payment, you can see exactly how much it will cost in interest to carry a balance if you don’t pay in full.

• Certain Visa partnership benefits, like auto rental collision insurance, theft coverage and roadside dispatch. Petal also supports Visa Local Offers, a way to earn Uber credits.

Petal® 2 "Cash Back, No Fees" Visa® Credit Card vs. other Petal cards

As the number in its name would suggest, the Petal 2 isn't the only card in the Petal lineup. Petal and WebBank also offer the Petal® 1 "No Annual Fee" Visa® Credit Card and Petal 1 Rise.

You don't really need to worry about "choosing" between the Petal cards; the one you're eligible for will hinge on your credit history or cash flow. (Petal’s pre-qualification process will confirm which option, if any, is a match for you.)

Here's how the cards stack up:

» MORE: Petal 1 vs. Petal 2: Which is right for you?

Evaluation based on multiple factors

You must be a U.S. resident with a valid Social Security number or an individual taxpayer identification number to qualify for the Petal® 2 "Cash Back, No Fees" Visa® Credit Card, but Petal's issuing bank may opt to weigh more than just your credit scores. It can also evaluate creditworthiness with an algorithm that also analyzes your income, savings and spending, according to co-founder and CEO Jason Gross. You’ll have to link your bank account to provide this information. Petal will have read-only access and won't keep your login credentials, according to its website.

No security deposit

Many cards designed for those with limited credit are secured products, meaning they require an upfront cash deposit as collateral, usually at least a few hundred dollars that's equal to your credit limit. You get the deposit back when you close the account (or upgrade it to an unsecured card), but it's money you've got to come up with on the front end. The Petal® 2 "Cash Back, No Fees" Visa® Credit Card has no such requirement.

A solid rewards program

The 1.5% maximum cash-back rate on the Petal® 2 "Cash Back, No Fees" Visa® Credit Card equals the ongoing rate on stalwart cards like the Capital One Quicksilver Cash Rewards Credit Card and the Chase Freedom Unlimited®. You'll need a year of on-time payments to work your way up to the top rate, but even the 1% base rate is better than what you'll get on most starter cards.

No fees

Petal® 2 "Cash Back, No Fees" Visa® Credit Card cardholders pay no fees. That means a $0 annual fee, no late fees, no foreign transaction fees or any other fees. You also won't be charged a penalty APR if you're late on a payment (although paying late can affect your credit scores). The company makes money from merchant transaction fees and interest paid on revolving balances. You can avoid interest charges by paying your bill in full every month. Paying on time will also keep your credit scores in good shape.

Potentially high credit limit

Starter cards are known for low credit limits, but the Petal® 2 "Cash Back, No Fees" Visa® Credit Card offers up to $10,000 for those who qualify for such a limit (based on creditworthiness). With secured cards, your credit limit generally is only as high as the amount of your security deposit. Other alternative credit cards tend to offer lower credit limits. And, if you don't get approved for the maximum credit limit, the Petal Leap program may offer a path to a credit limit increase. To qualify, you'll have to make at least six consecutive monthly minimum payments or pay 15% of your statement balance, whichever is greater. You also can't let your Vantage Score drop by 25 points or more below your initial credit score at the time of approval. A higher credit limit can have a positive impact on your credit score because it lowers the amount of available credit in use.

Worthy travel companion

No bonus rewards

When you're new to credit, rewards aren't the most important thing — building credit is. But rewards are still a factor, and it's worth weighing your options. Flat-rate cash-back cards like the Petal® 2 "Cash Back, No Fees" Visa® Credit Card are popular because they require minimal effort. But a card that offers bonus cash back in certain categories might be a better fit for your spending. For instance, the Deserve® Pro Mastercard is designed for applicants with established credit, but the company's underwriting process may allow exceptions for those who can meet income and employment verification criteria. The card earns 3% cash back on travel and entertainment and 2% cash back at restaurants, on up to $500 in combined purchases per billing cycle. For all other purchases, it earns 1% back.

No cash advances

Cash advances are short-term loans that you can get at a bank or ATM with your credit card. They can end up costing you dearly in fees and interest, but just know that if you happen to be in need of cash quickly, you won’t be able to draw any against the Petal® 2 "Cash Back, No Fees" Visa® Credit Card. The AvantCard Credit Card — another card designed for thin credit files — does offer cash advances, but again you'll pay for those, and you'll also owe an annual fee of $39.

Permanent minimum payment due date

Petal doesn’t allow you to change your minimum payment due date. If that’s a deal breaker, the Capital One Platinum Secured Credit Card lets you choose a date that works for you. That card does require a security deposit, but for those who qualify, it might accept one as low as $49.

Cost uncertainty

As noted above, a number of Petal cardholders who had been paying no annual fee were notified in mid-2023 that the terms of their account would be changing or that they were being moved to a different card entirely, so they would now be paying fees. As of June 2023, Petal's website said only that "Card fees and terms may vary for members acquired prior to 5/16/23."

You can review NerdWallet's list of the best credit card offers to see how these cards compare with each other.