Guide to Chime Credit Builder Card

Building credit, whether you’re establishing it for the first time or recovering from some credit missteps, is not an easy task.

You need to apply for credit and demonstrate you can manage it well. However, how can you do it if to be approved you’re supposed to have a good credit history? It’s almost like looking for your first job to get experience and seeing all employers require that you already have it.

Luckily, there are credit tools designed to help you establish yourself as a responsible borrower, such a secured credit card or credit-builder loan. Plus, the market for subprime and underbanked consumers is growing, with companies offering innovative products to serve this type of customer.

In June, Chime announced the launch of a credit card marketed as “a new way to build credit.” The unique product requires no minimum deposit, charges no fees and ensures the cardholder never misses a payment, all while reporting positive activity to the three credit bureaus. Read on to learn how it works and how you can get the new Chime Credit Builder Card.

How the Chime credit card works

The new Chime Credit Builder Visa Secured Credit Card was created to be paired with the Chime Spending Account, a mobile-friendly checking account. A cardholder uses money from that account to add it to their Credit Builder card, where it will be held as collateral.

After that, they can use the card anywhere Visa is accepted, and Chime will report the activity to Experian, Equifax and TransUnion.

To help card users stay on track and create a positive payment history, Chime offers an option to turn on Safe Credit Building, a feature that automatically pays the card’s balance on time.

Besides making credit building simple, Chime Credit Builder has other attractive features: It comes with a 0% APR and no fees of any kind – including annual fees – and requires no minimum deposit and no credit check.

No minimum deposit

Typically, secured credit cards require a deposit that becomes your credit line. Sometimes you can get it back when upgrading to an unsecured card; other times you’ll need to close the account to be refunded.

That’s not the case with the Chime credit card. While it’s still a secured card and requires collateral, you create it by transferring money from your Spending Account to your Credit Builder card. After that, you can borrow against that money and use it to pay off your charges. The amount is up to you, which makes this card a flexible and convenient option.

No credit check

When you apply for a credit card, including secured cards, the issuer pulls your credit. A hard inquiry can cost you a few credit score points and will stay on your credit report for two years.

Chime promises not to check your credit, meaning that applying for a Chime credit card won’t hurt your score. Instead of running your credit, Chime requires that you have a payroll direct deposit of $200 or more within the past 45 days – and that’s all you need to qualify.

No fees and no interest

Another significant difference between a traditional secured credit card and Chime’s innovative product is the APR. Since secured cards are designed for borrowers who are considered “risky,” interest rates on these products tend to run higher.

Chime Credit Builder has a 0% APR, so if you carry a balance, you won’t have to pay anything in interest. This is truly a unique offer: Even 0% APR credit cards designed for prime borrowers only offer no interest for a limited period – usually between 12 and 18 months. With the Chime credit card, you won’t ever have to worry about interest charges.

On top of that, Chime charges no fees, such as annual fees, maintenance fees or foreign transaction fees. This makes credit building a much simpler and more budget-friendly task with no surprise charges to be concerned about.

How Chime Credit Builder card can help your credit

Chime reports your credit card activity to the three credit bureaus – Experian, Equifax and TransUnion, the companies responsible for maintaining your credit reports. Since your credit score is calculated based on the information in these reports, positive payment history can improve your credit.

Plus, if Chime is your first credit card, it will add to your credit mix, which also can have a positive effect on your credit score.

Note that Credit Builder doesn’t have a pre-set credit limit, so Chime won’t report your credit utilization.

However, that’s not necessarily a disadvantage. Many secured credit cards have a low credit limit. This can lead to using a high percentage of your credit line even with small charges. A high credit utilization ratio can hurt your score, but with Chime Credit Builder, that’s not going to be a concern.

To help you make sure you’re building a positive credit history, Chime also offers a “Safer Credit Building” feature to make payments automatic. This way, you can rest assured you won’t miss a payment, causing damage to your credit score.

How to get a Chime credit card

Chime Credit Builder is a brand-new product, and it’s not open to applications just yet. Nevertheless, if you’re a Chime member, you can join the waitlist.

To join the waitlist, make sure you’ve signed up for a Spending Account and downloaded the Chime app.

Open the app and tap the “Settings” icon, choose the “Credit Builder Card” section and click on “Get early access.” On the next screen, you’ll see a green button labeled “Join the Waitlist.” Tap it – and you’re done!

You’ll see where you stand on the list. You can bump up your position by referring your friends, as you’ll jump closer to the top of the list if they join.

When it’s your turn, you’ll get an email invitation from Chime to apply for the card.

How the Chime credit card compares to other credit building tools

When it comes to credit building tools, you have several options. Let’s see how the Chime Credit Builder Card compares.

Secured credit cards

One of the most common ways to get access to credit while building it is with a secured credit card. Since it requires a security deposit that serves as your credit line, creditors minimize their risk and can offer this type of product even to subprime borrowers.

Unlike the Chime credit card, traditional secured cards charge all types of credit card fees, as well as interest that’s typically much higher than the average APR. On top of that, credit limits are usually on the lower side, making it easy to boost your credit utilization – which doesn’t help your score.

Credit-builder loans

A credit-builder loan is a small loan that freezes the loan amount in an account until you’ve paid off the balance. Some lenders open a savings account in your name or lock the funds that you already have in a savings account or CD. After you make the last payment, you’ll get access to the funds.

Like a secured card, this kind of loan requires an upfront payment, and like an installment loan, it charges interest. As a result, in the end you get less than you’ve put in. Not to mention, you won’t have access to the funds you’ve invested for quite some time – often for a year or more.

All of this makes the Chime credit card a more favorable option. However, you could use both tools together to strengthen your credit portfolio and diversify your credit mix. Lenders and creditors like to see that you can manage different kinds of debt well.

Other innovative products

The credit industry never stops developing and adjusting to consumers’ needs. Subprime borrowers and those with no credit history comprise a significant part of creditors’ and lenders’ potential customers. Like any market, they adapt and come up with new solutions – so stay on the lookout for new and interesting products.

For example, look into the Self Visa Credit Card. It’s a secured card that allows you to build up your security deposit gradually over time. The idea is similar to that of the Chime card: You use the money in your Self Credit Builder Account to secure a credit line. The card, however, comes with some fees, and the Self Credit Builder Account works like a credit-builder loan.

Final thoughts

Establishing or rebuilding your credit may seem like a complicated process, but innovative credit products like the  Chime Credit Builder Card make it easier. With no minimum security deposit, no credit check and no fees, this 0% APR secured credit card can be an amazing tool to help you score credit points and demonstrate yourself as a reliable borrower.