U.S. challenger bank Chime, now valued at $5.8 billion, is entering the credit card market with today’s launch of a new card designed to help consumers build their credit history by way of everyday transactions. With the Chime Credit Builder Visa Credit Card, users can control how much they want to spend by transferring funds to a “Spending Account” and can then charge up to this amount wherever Visa is accepted.
This makes the card feel more like a debit card, as it’s tied to how much cash is in a user’s bank account — rather than a traditional credit card which can allow for overspending.
Chime wanted to develop a new kind of credit card experience due the growing popularity of debit cards in the U.S. In 2018, the U.S. Federal Reserve said debit cards represent 50% of all non-cash transactions, the company noted. And younger consumers, in particular, prefer debit over credit, Chime had reported in the past. In a 2015 survey, Chime found that 67% of millennials prefered debit cards, which they feel are more secure and less likely to get them into debt.
However, relying on debit cards alone means younger consumers aren’t building up their …read more