A New Secured Card From Chime Brings Cash Back Perks to Cardholders and Competition to Issuers

Financial technology firm Chime has announced a new secured credit card, the Chime Card, that offers cash back rewards to cardholders.

It’s the latest solution from the outfit that markets itself as offering the “most loved banking app,” a claim it bases on a Qualtrics NPS study that compares Chime to leading banks and a select group of fintechs.

For traditional credit card issuers, Chime’s cash back card poses a direct threat to revenue. The risk is amplified as Chime narrows the gap with major banks by expanding its suite of financial products.

Chime, which went public over the summer, blew experts’ revenue estimates away with its performance in the second quarter of the year. Nevertheless, its stock slumped in the months following its initial public offering, faltering in both July and August. The fintech is now turning to a popular card benefit to win new customers.

More than 70% of Americans own a credit card that offers cash back or other rewards, and 68% say they prefer to pay with their credit card due to the rewards it offers them, according to a recent Ipsos study.

Now Chime enthusiasts can access cash back rewards of 1.5% through the Chime Card. Cardholders will be able to earn cash rewards when they use the card to make purchases in specific spend categories.

Each quarter, Chime will communicate the spend categories that allow cardholders to earn rewards.

The Chime Card is more than just a tool cardholders can use to earn rewards. The secured card can also help people with thin credit profiles to build their credit when they make on-time payments. 

The card complements other solutions Chime offers in its Chime+ membership program, including fee-free overdraft protection and early access to paychecks. 

Ryan King, Chime’s Co-Founder, said in a press release that the new card makes the Chime experience more rewarding for customers.

“We’ve kept the benefits people value most and removed the mandatory fees and barriers they don’t,” King said. “That’s how banking should work when it’s built for everyone.”

With Chime+, consumers can access their pay early and enjoy fee-free overdraft protection.

Traditional credit card issuers can differentiate their products by emphasizing features Chime’s card does not provide.

For example, Chime’s card limits spending to the amount deposited in a secured account. While this structure may suit new cardholders, others may eventually seek products that offer higher credit limits.

Issuers that offer both secured and unsecured cards let eligible customers upgrade without switching to another financial institution. Some even start customers on a secured card and transition them to an unsecured card when they’re ready.

Issuers can also highlight differences in their rewards programs to set themselves apart from Chime. For example, programs that offer multiple reward options — such as points redeemable for merchandise or travel — may be more appealing than those that only provide cash back.