Petal 1 Credit Card Review
Petal 1 Credit Card is a new(ish) credit card company working to change the way credit is approved by implementing something called cash flow underwriting.
- Building credit
- Second chances
- No credit checks to see if you’re pre-approved
The chicken or the egg quandary is similar to the story of credit in the United States. You need credit to prove you can borrow money responsibly. You need to borrow money to build credit. If it seems like a system that’s stacked against you, that’s because, in many ways, it is. For many traditional lenders and credit card companies, if they are not directly taking advantage of you, they certainly profit from your failure. This standard of lending has opened up the industry to alternative lenders and platforms in recent years that promise to “democratize” lending and credit, making it more accessible to over half of Americans who don’t have the credit history to support loans and lines of credit.
What is Petal?
Meet Petal, a new(ish) credit card company founded in 2016, working to change the way credit is approved by implementing something called cash flow underwriting. Its founders believe that determining your creditworthiness off of your credit report or score is an incomplete and inaccurate way of assessing your ability to pay back debt. Instead, it examines your bank statements, the money that you have flowing in and out each month, and your savings and spending habits to make a more accurate assessment of how much debt you can afford.
Credit history is crucial in determining where you work, where you live, where you travel, and where you spend. And it’s highly sensitive. One small black mark — oftentimes from something that is out of your control — can derail your credit for upwards of a decade. Research also shows there are disparities in the ways that these challenges are carried, mostly along racial and socioeconomic lines. Communities that are traditionally underserved are more likely to feel the brunt of the effects of bad credit.
Petal not only understands that the traditional way of approving credit can perpetuate inequality, but it is also actively advocating against it. On February 4th the company filed an official comment letter with the Consumer Financial Protection Bureau (CFPB) regarding the use of consumer data in underwriting loans. Its view is that the traditional way of approving debt — by examining credit history — is stagnant and backward-looking, and instead, we should be looking forward, and determining what someone can afford by their current financial situation and spending habits.
That is specifically how they approve applications for their Petal 1 Credit Card. It also offers Petal 2 “Cash back, No fees” Visa Credit Card, for a more substantial credit history and rewards. CEO and c0-founder, Jason Gross, believes that Petal 1 is expanding access to good and honest credit, instead of turning customer failures into company wins.
Both Petal cards are issued by WebBank, Member FDIC, and Petal reports to all three major credit bureaus.
The mobile app helps you stay on track with your payments and track the spending on your card. It has a sliding bar that calculates in real-time how much interest you’ll pay based on the amount of your payment. The app highlights subscriptions so you can be aware of how much you’re spending monthly and helps you cancel them if you no longer need them. The app is available for IOS and Android.
Variable APRs between 19.99% and 29.49% depending on your cash score.
Also dependent on your cash score, credit limits range from $500 to $5,000.
Normally one of the trade-offs for credit-building and secured cards are the rewards, but Petal 1 gives you cash back on every purchase from the moment you open your account. Its system is tiered, so you start out at 1%, then move up to 1.25% after six on-time payments, 1.5% after 12 on-time payments, and so on. This system incentivizes you with cash (not just good standing and avoiding late fees) to make payments on time. Also, you can earn up to 10% cash back at certain vendors, which are available in the mobile app.
Petal 1 isn’t offering any promotions right now.
Petal 1 only charges late fees (up to $29 for the first late payment and $40 for the second), which are pretty hefty charges, so you’ll want to stay on time with payments. The mobile app makes it pretty easy to do that by tracking your spending and giving you reminders. Petal 1 does not charge annual fees or international fees.
The pre-application process is fairly simple. Petal will ask for your phone number, email address, and income information. Within a few minutes, you’ll see something like this.
This is as far as you’ll get without affecting your credit. After this page, you’ll be asked to submit your application, which authorizes Petal to initiate a hard credit pull. Petal, like many companies, advertises a pre-approval and checking your terms without hurting your credit score. While this is true, you don’t get to see your actual approved terms that are specific to your application without pulling your credit — you’ll get a recommended product like above and a range of terms. In Petal’s case, it’ll tell you if you’re best suited for their Petal 1 or Petal 2 card. So you really don’t get much of a decision before you pull credit. However, keep in mind that though a hard credit pull does show up on your credit report, it doesn’t really have an impact until you start applying for a lot of cards and loans. If you’re just applying for Petal 1, you don’t need to worry too much about your credit impact.
Both of Petal’s credit cards are chip cards, which a lot of vendors are moving to because they provide extra security through the use of a one-time code generated for each transaction. Additionally, they monitor your account 24/7 and reach out immediately if suspicious charges appear.
Like many online platforms, Petal has a help center that consists of a lot of articles to answer commonly-asked questions. Here, you can find answers to basic questions, like the difference between their products, costs, and comparisons to secured cards. If you want help directly, you will need to submit an email inquiry or give them a call (it doesn’t take long to be connected to a real person). You can call them Monday through Saturday, 8 a.m. through 12 a.m. EST.
It may sound a little casual, but because Petal was conceived in a “millennial” image, they have a pretty good social media presence. You can DM them on Twitter or Instagram with questions, and they have pretty informative FAQs on those platforms as well. They don’t offer credit counseling at the moment but are prepared to help you find local resources.
Petal 1 Credit Card Review
- No security deposit required — Generally, if you have money to pledge as collateral or enough for a security deposit, you can get approved for about anything. But for most of us, that defeats the purpose of trying to borrow money in the first place. Most credit-building cards want you to put money down to secure your credit line, which they are able to sell because they’re helping you build credit. Because Petal examines your cash flow and spending, they are able to place more trust in your ability to support debt. They do not require a security deposit.
- Low minimum credit score — Because of the technology that allows it to utilize cash flow underwriting and its philosophy that credit reports are a backward way of determining credit-worthiness, Petal is able to approve people with much lower credit scores than typical credit cards. Its minimum is generally around 550.
- No introductory offers — At this point, Petal 1 isn’t offering any introductory perks, which is not enough to defer you from the other features, but kind of a bummer. One of the most exciting things about opening a credit card is getting an interest-free period or bonus rewards. But these are actually gimmicks used by credit card companies to get you to spend (and fail) more, which is probably why Petal doesn’t use these perks. Its goal is to keep you on track from day one and not incentivize you to spend more than you need to.
- Be wary of high fees — Petal doesn’t charge any annual or international fees, but its late fees and bounced payment fees are pretty high (up to $29-$40). Make sure you pay on time and don’t miss payments.
- No balance transfers — Balance transfers can be a really good way to get out from under big credit card balances, but unfortunately Petal 1 does not accept balance transfers at this time.
OpenSky® Secured Visa® Credit Card
The OpenSky® Secured Visa® Credit Card is another secured line of credit, only its minimum deposit is quite a bit hefty at $200. Your deposit is returned only after your balance is paid off and your credit line is closed. Additionally, there is a $35 annual fee, which is on the low end compared to other cards, but still more compared to the cards that don’t charge one at all.
OpenSky is focused on helping people build back credit through their support communities and platform. One of their biggest perks is that their application, not just their pre-application, does not require a credit check. It also offers cash advances, which is a standout feature amongst credit-rebuilding cards.
Given its lack of rewards and high minimum security deposit, I think there are better options to get the most out of your journey in building or rebuilding credit. However, the OpenSky card is not a bad option by any means, and certainly not one that’s going to do you any harm.
OpenSky is issued by Capital Bank, FDIC-insured.
Milestone® Gold Mastercard®
Milestone, like Petal 1, allows you to pre-qualify without impacting your credit score (remember what we said about this). It boasts a card designed for imperfect credit histories, extra credit, and access to Mastercard’s best features, like fraud protection, all positive things. But like OpenSky and Capital One, there aren’t any rewards offered with this card. This can be a good thing if you fear you don’t have the discipline to resist overspending. Its most compelling feature is that, like Petal 1, it does not require a security deposit.
The Milestone Mastercard is issued by The Bank of Missouri, FDIC-insured.
Secured Mastercard® from Capital One for Rebuilding Credit
The Secured Mastercard® from Capital One is a line of credit that’s secured by a required security deposit. The minimum is a $49 or $99 deposit for a $200 line of credit, which will vary based on your credit score, or you can deposit more money for a higher LOC. If you do well within the first 6 months, you are automatically considered for a credit limit increase. Plus, Capital One monitors your behavior within the first few months to give you the opportunity to earn your deposit back as a credit to your account. It is not clear about the criteria for this determination, however.
This card is a good intro card and would be a good option for a student or someone new to borrowing – especially if you have someone who would be willing to secure the line for you and help you build credit. It doesn’t charge an annual fee which is always a plus. If you’re short on cash or are working out of bad debt, I would still opt for Petal 1 over this card.
|Secured Mastercard® from Capital One||26.99% variable||Students, recent grads|
|OpenSky® Secured Visa® Credit Card||17.39% variable||Poor credit history|
|Milestone® Gold Mastercard®||15.49% - 25.49%||Poor credit history|
Who is Petal 1 For?
This card is not strictly for those who have a lower credit score or poor or absent credit history, and in fact, many have opened a line with Petal just to supplement their other credit cards. But this card was designed with those in mind who are in need of an option to build credit without a high credit score or substantial credit history.
If you have the credit score and cash flow to support a heftier rewards card, you may want to forego this card for now.
What Others are Saying
The very few TrustPilot reviews are scathing, but mostly in the way of customer service. After reading about this card, I’ll admit that the customer service presence seems scarce, but not much worse than other credit cards. They are available during certain hours, but if you’re looking for a more attentive and hands-on approach, this may not be the service for you.
WalletHub was a little nicer, giving 3.5/5 stars. Again those who were frustrated had bad customer service experiences. Generally, though, the consensus is that people found this card helpful in rebuilding their credit.
In my experience and from what I can tell about this card, Petal 1 is a good option for people who don’t have stellar credit history or those who are new to credit cards and may be striking out on their own. Its intention as a company seem honest despite its less-than-stellar customer service reviews.
Like all credit-rebuilding cards, Petal 1 won’t give you all the hefty benefits of some of the heavy hitters, but it does dip a toe in almost every category. You can rebuild, apply with a low credit score, and be free from annual fees. And then there are the rewards, which really are a standout among credit-rebuilders and secured cards. Even if you’re not super concerned about your credit history, having more lines open can be a good thing for your debt usage ratio. Petal is a pretty low-stakes application and account, with good benefits. It may even boost your score if you leave it open.
Scoring the Product
Fees are not the worst, but pretty high for late fees, especially for people who are new to borrowing money.
The biggest seller here is the rewards, since most other credit-rebuilding cards are so focused on securing your line or helping you build, they forget about rewards. Petal 1’s cashback offers are pretty unparalleled in the world of secured or credit-rebuilder cards.
Because everything was conceived with digital users in mind, this card and app generally blow competitors out of the water. Apple may be the only one who can rival the visualization of your debt, interest, and payments. If you’re trying to track spending and payments, you can’t beat the sliding bar that tells you how much interest you’ll pay based on your payment amount. Its app also makes it easy to automate payments.
Finally, in spite of some reviews, the customer service seems pretty run-of-the-mill. It is not going to hold your hand, but it is available for your protection and to answer your questions. Some of the dissonances here may come from the fact that it advertises credit-check-free pre-approvals and low minimums, which can lead people to believe that they will be approved no matter what, which is not the case. Petal still has to run credit and review your financials before they are comfortable giving you credit.
Petal 1 is a great option for builders, rebuilders, or those in the middle. The card features are good enough themselves to stand alone, but on top of that, they are backed by a company that not only cares, but is advocating and implementing measures that can directly benefit all consumers, and provide access to those who would traditionally be shut out of this industry.
Even if you yourself are not in need of this card, maybe you feel like supporting a good cause. In any case, there is enough attention being drawn to this type of cash flow underwriting that it may very well be where the industry is headed.
Check out the website to learn more.