A Credit Card That Wants to Teach You How to Use It


Consumers with low credit scores often have to deal with limited access to credit. After all, they are by definition risky customers for creditors to do business with because their history has shown they are less likely to repay their debts than borrowers with good credit.

Unfortunately, that also means that when credit is available to subprime borrowers (traditionally, those with credit scores lower than 680), loans and credit cards tend to come with higher interest rates and far fewer perks. And some subprime credit cards can be downright predatory in the extra fees they heap onto borrowers.

LendUp, a Silicon Valley-based startup focused on expanding access to safe credit for traditionally underbanked consumers, is trying to change that through its new L Card, which is currently available on a limited basis only.

The card offers credit lines between $300 and $1,000, features an annual percentage rate (APR) between 19.99% and 29.99% with annual fees between $0 and $60 (based on creditworthiness), according to Leslie Payne, head of corporate affairs and social impact for LendUp.

Those interest rates are significantly higher than the average interest rate for all credit card accounts, which is just over 12%, according to the Federal Reserve, but are in keeping with subprime credit card rates, which are traditionally higher.

Where LendUp really stands apart is in their education offerings. Accountholders can take roughly a dozen classes aimed at improving their credit scores and understanding of everything from reading a credit report to protecting their identity online. Those classes can count toward a customer’s increased credit line or lowered APR, Payne said, as can on-time payments and general good management of the card.

“With other cards, you don’t know what you have to do for how long to know when you get a credit increase or a reduction in [APR],” Payne said. “We want to make that process as clear as possible.”

The card has no hidden fees and a grace period for payments, which, as Payne pointed out, can be uncommon among subprime cards. LendUp also provides a smartphone app that lets users freeze charges in case of loss or theft, and a “financial health meter” that TechCrunch.com said “clearly shows how much credit the customer has left to spend.”

“LendUp’s mission is to provide anyone with a path to better financial health,” Payne said.

Besides the L Card, LendUp also offers a variety of loan products. Payne said the company is still focused on learning and will make the L Card more widely available at a later time.

Looking for Credit? 

Remember, no matter what credit card you are considering, it’s important to read the full terms and conditions carefully to be sure it’s right for you. And it’s also a good idea to avoid charging more than you can afford to pay off in full (and on-time) at the end of the month, particularly if you’re focused on building your credit. High credit card balances can hurt your scores. Not to mention, credit card interest can quickly add up. (You can calculate the lifetime cost of your current debts here.)

If you have so-so credit, there are many steps you can take to make improvements, starting with checking your credit scores regularly and requesting your free annual credit reports every year at AnnualCreditReport.com. You can also get your own personal credit report card at Credit.com, which offers you two free credit scores, updated monthly, plus a personalized report that tells you how you’re doing in the five key areas that are included on your credit report and determine your credit score: payment history, debt usage, credit age, account mix and inquiries.

Image: ASIFE

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