A New Secured Credit Card Empowers Consumers to Build Credit by Paying Their Monthly Bills

Augie — a financial technology company that helps consumers build credit profiles — has announced a new secured credit card known as the Augie Card. Consumers in the U.S. who pay recurring bills via their bank account or another financial offering are eligible to open an Augie Card, which does not charge cardholders an annual fee.

Allowing consumers to use the Augie Card without imposing an annual fee is one more way Augie puts consumers in position to achieve their financial goals. Augie also does not charge interest on purchases made via the card.

Consumers can set the Augie Card to pay their recurring monthly bills, which helps them manage their expenses and build a credit history. Paying for transactions with the card over time can aid cardholders in establishing and improving their credit scores.

We caught up with Paul Harkins, Augie’s Co-Founder, to learn more about the Augie Card program and how it can benefit consumers. Harkins told us the idea for Augie came about when his eldest son encountered roadblocks while trying to rent an apartment and open a credit card, which was nearly 10 years ago.

His son — a college graduate who had a job at the time — was experiencing challenges due to the fact that he didn’t have a credit profile.

Harkins soon realized that a secured credit card was “the best vehicle you could possibly have to build credit”, he told us, and he set out to create a secured card that could help people in situations similar to the one his son faced.

Harkins and his team sought to create a secured card that didn’t require consumers to make a large security deposit or pay monthly or yearly fees. As the likelihood of creating a product that suited their vision became stronger, other obstacles arose.

People who don’t have a credit history or a credit report at Equifax, Experian, or TransUnion can be described as credit invisible, according to Experian. Harkins told us that there are approximately 20 million consumers in the U.S. who are “completely credit invisible” while another 18 million to 20 million have thin credit profiles.

Young adults have a lot on their minds, from keeping up with the latest social media trends to deciding what type of career they want to pursue in life. That means that credit card issuers can have a tough time getting their products on the radars of young adults.

College students may not mind being credit invisible, but their perspective may change soon after graduation. Having a strong credit profile can provide a significant financial boost to consumers who need access to lending solutions to afford some of life’s more substantial expenses.

The Augie Card can aid the millions of consumers in the U.S. who don’t have a credit history.

“A good portion of young consumers are credit invisible because they’re not using credit as much anymore,” Harkins told us. “Then all of a sudden you have these people that are not going to be ready to buy cars or ready to get mortgages. So you’re pushing that whole cycle off into the mid to late 30s, which is exasperating people.”

The problems credit invisibility can cause were made apparent after an examination of the initial reaction to the Augie Card. Harkins told us the company expected its first wave of users to fall between the ages of 18 and 24. But the majority of the card’s early users are in their early 30s.

Many of a consumer’s purchases — not just the most expensive ones — are affected by their credit score. Harkins told us that a consumer’s credit score can impact various areas of their life, including the cost of a new mobile phone plan, the amount of a security deposit required to lease an apartment, or even whether a lender requires them to have a cosigner.

“Everything in the world, sadly, is based on credit,” Harkins told us. “It’s a facet of life that most people don’t understand because it’s opaque. But if you start the right way by establishing a great credit score and understanding what budgeting is, then you can take care of all those things that require credit without necessarily having to buy a home.”

Consumers may find out about Augie through their bank or employer, entities Harkins refers to as trusted bridge parties. After a customer enrolls in the company’s app, Augie verifies their identity through know-your-customer processes. Harkins said Augie then examines the past 90 days of transactions from a customer’s bank account to identify recurring payments.

Augie then suggests which bills the customer should pay with the Augie Card to begin establishing their credit history. Once the customer accepts Augie’s suggestion, the company verifies each month that they have enough funds in their bank account to pay their bills by their due dates. 

Augie will reach out to customers who have insufficient funds in their account to pay for an upcoming bill. Through this process, the company is imparting budgeting skills to its customers.

Augie places the funds it pulls from customers into an escrow account, and the customer can then choose to pay back Augie through those monies or another source.

“It’s a secured credit card, but the difference is that we’re not requiring a consumer to allocate a certain dollar amount upfront as their security amount,” Harkins said.

The Augie Card launched earlier this year, but, for the time being, consumers must join a wait list and receive an invite code before beginning the process of opening one. Harkins said the company plans to soon make the card available without an invite code to the general public.

The approach Augie is pursuing with the Augie Card won’t appeal to every credit card issuer. But Harkins said the company’s strategy of meeting a customer’s payment needs while improving their credit profile is working as the company expected it would. 

Augie plans to graduate customers who’ve had success with the Augie Card into other products offered by providers the company has relationships with, Harkins said.

“The mission behind Augie is to create intelligent, creditworthy consumers,” Harkins told us. “It’s important to not just build the credit score, educate them, and then ship them off. We anticipate that we’ll be able to retain that consumer’s relationship into the foreseeable future.”