Chime Credit Builder Card is an innovative product introduced by Chime, that has given many traditional banks a run for their money. It is unique when you compare it to other credit cards and as the name indicates, the intent is to help you build your credit score. If you are curious to know how the Chime Credit Builder Card works and how to use it, you are on the right post to get the complete details.
How Does Chime Credit Builder Card Work
While Chime Credit Builder Card is a credit card, it actually works like a prepaid card. To use Chime Credit Builder Card, you first need to deposit money in a Credit Builder account which acts as a secured account. The amount which you deposit in this secured account becomes your Credit Card limit and is the maximum amount you can spend using your Chime credit card.
On the due date, the amount you spent on the credit card will be paid back from this secured account either automatically through direct debit (if you have opted for this option called as “Safer Credit Building”) or you can manually pay the amount from this secured account.
So technically, you can never overspend with Chime Credit Builder Card, as it wont allow you to spend more than the amount available in your secured account. In other words, Chime is not really giving you any extra credit. It is rather enabling you to reserve your own money in a secured account in advance to take care of any spend you have on your Credit Card.
Why not just use your debit card then? Well because the transaction and payments that you do towards your Chime Credit Card “dues”, get reported by Chime to Credit bureaus, which can help build your credit card score. That way it is also safe, since you cant overspend and you will not have to bear any annual fees or interest that come with a typical credit card.
You may also have a question – What about having a high utilization?
Normally, credit cards assign a credit limit based on your score. The thumb rule is you should avoid using a high percentage of your credit limit to avoid a negative impact on credit score – as you are seen to be more risky borrower if you use high portion of the limit.
The amount you consume out of your credit limit is your utilization. e.g. if you have a credit limit of $1000, and you use your credit card for $800, that is 80% utilization which can be very high and negatively affect your score.
But in case of Chime, there is actually no fixed or pre-set credit limit and the amount which you have kept in your Chime builder account acts as the limit, which you can increase at any time by transferring more money from Spending account to Chime Credit Builder Account. So the utilization is not reported by Chime to credit bureaus and therefore has no impact on your credit score.
But your transactions and payments history is reported to credit bureaus. That way, it works mostly positively to only build your credit.
Some Unique features of Chime Credit Builder Card
- No Annual fees
- No Interest
- No Credit Check
- No possibility to overspend as the amount you have kept in Chime Credit Builder account becomes your credit limit
- No reporting of utilization to Credit bureaus
How to get Chime Credit Builder Card
- Create a spending account with Chime
- Set up Direct deposit of at least $200
How to Use Chime Credit Builder Card
- Sign up for the Chime Credit Builder Card on Chime App. For this you need to have a spending account with Chime bank and have a direct deposit of at least $200 in last 365 days to be eligible
- Next move the money you want to use on your card from Chime Spending account to Chime Credit Builder Account. This has to be done beforehand and works as your credit limit-i.e. amount which is available to spend on your Credit Card.
You can do this manually in the Chime App as and when needed OR use the “Move My Pay” option to set up this to happen automatically every time you receive a payment in your Chime Spending account
- Use your Chime Credit Builder Card in the normal way for your every day purchases like grocery, gas, meals, monthly bills etc. As and when you make a purchase, the amount is deducted from your available to spend amount that you have parked in your Chime Credit Builder account.
- Make payment for the Chime Credit builder card outstanding on the due date. This can be done manually on the due date or you can set this up to happen automatically using the “Safer Credit Building” option.
The consistent use of your Credit Builder Card can help you a build on-time payment history and increase the overall length of your credit history over time etc.
What gets reported by Chime to Credit Bureaus
Chime reports the following data to the major credit bureaus – TransUnion®, Experian®, and Equifax®
- Payment Status- whether or not you paid the last month’s balance due on your chime credit card. This is is a key factor in building Credit score. If you have turned on Safety Credit Building, Chime automatically makes the payment on the due date using the balance from your secured account and you don’t need to worry about possibility of missing any payments of due date.
Also, since you cant spend for more than amount available in your secured account, you don’t have to worry about having the money to pay for your credit card dues at month end.
- Amount Past Due– any amount which is outstanding beyond the due date, this can happen only in situations where you are making payment manually and fail to pay on time from your secured account.
- Account Age-how long you have been a user of Chime Credit Builder card
- Current Balance-the current amount you have spent on your credit card + last month’s past due (if any)
Does Chime Credit Builder Card actually work to improve your Credit Score
The Chime Credit Builder Card is set up in such a way that you cannot overspend and missing a payment is remote possibility, if you have opted for auto-debit via Safer Credit Building.
So the probability of your credit score going up on use of Chime Credit Builder card is quite high and many chime users have been able to improve their credit score with this product. However, the credit score may improve only over a period of time.
As per Chime website, it typically reports to credit bureaus at the beginning of every month, but credit bureaus can take a few weeks to process reports – so you might not see the changes until later in the month.
Also, the factors like how much you spend using the credit card and for how long will influence the increase.
While there is a good possibility of you seeing an improvement, there is no guarantee and if you use other credit cards, they also impact your overall credit score.
But make doubly sure you don’t delay any payment for your Chime credit builder card, as this can have a negative impact. To avoid this, I would recommend you always keep the Safer Credit Builder option activated so that Chime auto-pays your credit balance from the funds in your Chime Spending account.
Again, be patient to see an improvement in your Credit score.
Can You Overdraft Chime Credit Builder Card
No, you cant overdraft your Chime Credit Builder card as the amount you are allowed to spent cannot exceed the balance available in your Chime Credit Builder Account.
Overall, Chime credit builder card is a unique product and is a go-to option if your main objective is to build a good credit history and improve your credit score. It is not actually for getting a credit, as the funds are coming from your own secured account.
Here Chime helps you minimize or eliminate the negative behaviors generally associated with a credit card like overspending or missing a payment (if you opt for automatic payments) so that your credit score stays on the right track.