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Petal, the start-up credit card company that offers a no-cost line of credit to people without a credit history, is now available to the public.
Launched earlier this year by co-founders Jason Gross, Andrew Endicott, David Ehrich and Jack Arenas, Petal has secured a $ 34 million credit facility from Jeffries and Silicon Valley Bank. bring its consumer credit product to the mass.
With this money, Petal will go beyond the few thousand customers who have tested the company's credit card when pre-distributing the card to applicants.
Petal uses the customer's bank account information and payments to create a credit score for those who have not had the time to draw up a financial chart that most banks or credit card companies use to create Risk profiles and issue credits.
"We use more data than our credit history to make credit decisions," said Jason Gross, co-founder and general manager of Petal. "These are common sense indicators about your finances: how much do you save and spend each month."
According to Gross, this window to his clients' consumption habits allows his company to issue lines of credit with higher limits than its competitors and with the lowest annual financing rates for new borrowers.
Annual percentage rates start at 14% and reach 25%, which is the norm for the industry, says Gross. And Petal offers credit limits ten times higher than those of its competitors. Another difference between Petal and its older competitors is the elimination of all fees by the company.
"We want to eliminate traps and fees. We have no fees. No late fees, international charges, or fees over the limits, "says Gross. Petal earns money from the interest it pays and transaction fees it receives from suppliers when its customers use their card.
"We want you to pay on time and develop your credit," says Gross. It's also clear about the amount of interest rates that will end up costing its users dearly, says Gross. "Before taking an interest in Petal … we show you how much it will cost you … .you have a minimum payment and the balance of your statement …. All the costs associated with the minimum payment … we make that information clear, "he said.
These credit limits and the card's transparent approach to costs and commissions offset the lack of other benefits that cardholders would obtain from competing lenders.
And, Gross points out that Petal is primarily a borrower for the first time. People looking to rebuild their credit score will probably not be approved for a Petal card. Indeed, the demographics of the company skew the younger middle class and steadily, according to Gross.
Typical Petal card candidates are between the ages of 20 and 20 and earn between $ 30,000 and $ 70,000 a year.
On the market for a year, Petal has issued cards to more than 1,000 early adopters and is about to hit the 10,000 registered borrowers with the company by the end of the year.
The company, which recently raised $ 13 million from Valar Ventures, The Social Entrepreneurs Fund, Third Premier, The Gramercy Fund, Story Ventures, RiverPark Ventures, Ride Ventures and other institutional investors.
In fact, investors invest a lot of money in the credit space, and in particular try to find a way to reach the restricted file customers who are the target audience of Petal. Deserve, a startup supported by Accel Partners (among others) also offers potential borrowers with a similar approach.
It is certainly an important market to address.
"If you look at people who have problems with invisible files, the invisible credits, those who do not have an exact score, are mainly young people, but it is disproportionately never had access to financial services, "Gross already said," Minorities, immigrants, if you miss a score – or a specific score – it can cost you a lot over the course of your life. Not having a score, you are treated like a subprime, you can not claim most financial products, or they will be more expensive and less performant. "
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