Petal raises $ 13 million to provide millennial starter credit cards
Petal, a financial technology start-up that aims to providing credit cards to youth and others who have no credit history, raised $ 13 million, he said Wednesday.
Series A was led by billionaire Peter Thiel’s Valar Ventures. The funds will be used to roll out the credit card nationwide; it is currently only available on the waiting list, where it has attracted some 40,000 people.
Petal is one of a new generation of companies using non-traditional data in their underwriting to approve Millennials, immigrants, and other consumers who are typically turned away from banks and lenders due to their limited credit histories.
Petal depends on a potential borrower’s cash flow: how much money he makes, how much he spends on rent, bills, groceries, and other things, and how much he saves.
The company collects this information by requesting access to a person’s bank account. It also takes into account a person’s credit score and background when available.
The Petal Visa credit card offers interest rates between 13.99% and 24.99% on credit limits ranging from $ 500 to $ 10,000. It also boasts zero fees.
“There is a huge need for affordable credit if you’re new to lending,” says co-founder and CEO Jason Gross.
The Consumer Financial Protection Bureau estimated that 45 million Americans – one in five of the adult population – do not have a credit history or have an insufficient history to generate a credit score. A credit score, which is a three-digit number calculated from information on credit reports from Experian, Equifax, and TransUnion, measures a person’s borrowing history.
Petal could offer an alternative to secured credit cards, which are often recommended to consumers looking to build up credit and offer a minimum credit limit (say, $ 300) in exchange for a deposit of the same amount. It is also looking to replace payday loans, auto title loans and other forms of costly debt.
Since he does not charge a fee, Petal earns money on the interest that accrues when a cardholder does not pay their monthly balance in full; and card transfer fees borne by merchants.
There is no cash back or travel rewards associated with the card, which suggests that as cardholders accumulate and improve their credit, they will eventually switch to another card. Petal said it would introduce benefits and features for cardholders at a later date, but declined to provide details.
The New York-based company was formed in 2016 by Gross, a Harvard-trained attorney, David Ehrich, a JPMorgan and American Express veteran, Jack Arenas and Andrew Endicott.