A New Credit Card Arrives -- With a Silicon Valley Twist (wired.com)
- Reference: 0153857525
- News link: https://news.slashdot.org/story/21/10/18/1840256/a-new-credit-card-arrives----with-a-silicon-valley-twist
- Source link: https://www.wired.com/story/x1-new-credit-card-with-silicon-valley-twist/
> When Deepak Rao founded his first startup, in 2011, he put all of his business expenses on two personal credit cards, with a combined credit limit of about $3,000. "They were totally maxed out all the time," he says. "To this date, my credit score has never recovered." Even after four years of working at Twitter with a product manager's salary, Rao still couldn't qualify for credit cards with the kinds of perks he wanted: ones that paid for vacations, or gave him points at the places he liked to shop. With his second startup, Rao is trying to solve that problem. The X1, a new credit card, is designed for people who want premium perks -- with or without premium credit scores. It uses a novel underwriting process, which links with a user's bank account to determine credit limits based on cash flow. The card promises up to five times higher credit limits than the average card.
>
> The card itself is made of stainless steel -- the kind of objet d'art that's advertised as making a pleasant clang when you drop it -- but it's meant to be used digitally, like the Apple Card. It has a sleek app that gives users the ability to create disposable "virtual" cards, cancel subscriptions with one click, and make anonymous transactions without giving out a real name or card number. Its points are redeemable at a list of merchants frequented by the stereotypical tech bro: Peloton, Patagonia, Allbirds, and Airbnb. Perhaps for that reason, the X1 has become something of a Silicon Valley darling, with a waitlist of more than 350,000 people, the startup says. Its investors include Affirm CEO Max Levchin, Box CEO Aaron Levie, and Yelp CEO Jeremy Stoppelman. "I think of it as Silicon Valley's answer to American Express, which is really for the old guard at this point," says David Sacks, the venture capitalist and PayPal alumnus, who sits on the X1's board and uses the card himself.
[1] https://www.wired.com/story/x1-new-credit-card-with-silicon-valley-twist/
Try budgeting (Score:3)
If your cards are always maxed out, you have no idea how budgeting works. No one in their right mind would issue more credit.
Pay your balance down. It's much easies than starting a questionable loan business.
Re: Try budgeting (Score:3)
He only had $3k in credit card debt and in 4 years with a good salary couldn't figure out how to get his score back up? Either he's full of shit, is misrepresenting what he did to trash his credit, or doesn't have a fucking clue about how financing and credit scores work.
Re: Try budgeting (Score:2)
That...or he's just a scammer preying in fresh-out-of-school techies with a sob story atuned to the silly valley environment he wants to target.
This isn't any different from the guy asking you for a 20 to pay a parking bill or fill a gas can or fix a tire at 11pm on a Friday night.
Re: Try budgeting (Score:4, Insightful)
This was my thought too. There are too many issues with this premise. A credit limit of $3k is nothing, you can get that with no credit score straight out of high school or college. And that was ten years ago. Unless it took him four years to pay off the three grand, any effects of his maxed out cards back then would be erased from his credit score. Which means either he is lying or he is terrible with money. Back in 2011 I had triple that credit limit making less than $20k a year and had no trouble both paying off my loan and raising my credit score. So this guy is either scamming or he is terrible with financials. Either way there is no way I'd take a credit card from him.
Re: Try budgeting (Score:2)
He's trying to make money, not help anyone for one thing.
I mean you know who else knows your cash flow and will issue you credit cards? Your damn bank or credit union.
Then the points/rewards thing, that's a silly game, I'm not saying anyone is entitled to points/cash back etc., I know damn well how transaction fees and credit card rewards work, but most people are far better off with cash back than ... "points"
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He couldn't even improve his own rating when he became financially successful. Why would anyone want him running their credit card company?
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> He only had $3k in credit card debt and in 4 years with a good salary couldn't figure out how to get his score back up? Either he's full of shit, is misrepresenting what he did to trash his credit, or doesn't have a fucking clue about how financing and credit scores work.
Furthermore, how does one even fund a startup with only $3k of credit on credit cards? And how borked is your credit if you can only get that amount? My freaking Sears card (when I had one) had a higher limit.
So now a guy who couldn't qualify for a line of credit to fund a startup is behind a startup offering higher lines of credit to people that can't qualify for higher lines of credit? Sounds *super* sketchy. Are there kneecaps being broken by their repayment department?
> It uses a novel underwriting process, which links with a user's bank account to determine credit limits based on cash flow.
Also, the whole point of a cre
Re: (Score:2)
I finally have a real credit line after many years of being unable to get any credit but secured loans from local banks. The only thing that changed was getting a secured credit card and paying on it for a few years.
All the typical advice about improving your credit is the Right Thing to Do, but people who are caught in statistical black holes and can't get proper lines of credit--whether they are like me and started from zero or like the subject of the article who had some rough times but are long past it
Re: Try budgeting (Score:2)
They have an alternative: secured credit lines.
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Or don't buy on credit. Then your credit rating doesn't matter.
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Unfortunately, that isn't entirely feasible in modern society. Not that it isn't possible to live without credit, but there are many things where you would be restricted/excluded without a good credit score. Things like insurance discounts, car rentals, house/apartment rentals, or security deposits.
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Maybe we could use another alternative to the broken system rather than just feeding it more.
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If you put a significant portion of your expenses on your card, you can max or nearly max the card and still pay it off every month. Between in-store skimmers and online hacks, I rarely let anyone see my debit card number. Fraud is much easier to resolve on a credit card where you're not out the money until you lose a dispute. With debit, the money is gone immediately.
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I follow the same logic - with a credit card you are not automatically out of money and with a reasonably low cap you are not defaulting mortgage and car payments if someone skimjacks your card.
Re: Try budgeting (Score:2)
And that churn is the best way to improve your credit. That's how it's always worked, to my knowledge. I don't get why millennials can't figure out that sometimes asking your parents how the world works is a good idea.
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> I don't get why millennials can't figure out that sometimes asking your parents how the world works is a good idea.
Because the problem didn't start with them. The heavy growth of credit card debt started with Baby Boomers and early Gen, with credit card debt rising heavily in the 90's. That, and age doesn't always bring wisdom. I've gotten a lot better over the last decade. However, if I had a kid, I would definitely want him to find a better example than me.
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Considering that the boomers are (as a group) the most financially profligate generation in American history, I would guess that they saw how bad their boomer parents are with money, and opted to nope the fuck out of that kind of "advice". I've heard all sorts of bad information from my boomer dad about money, and despite my boomer mothers good sense, she still let her husband ruin her credit for years (including bankruptcy once). I learned most of what I know about the importance of balancing a budget from
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> I don't get why millennials can't figure out that sometimes asking your parents how the world works is a good idea.
Perhaps if you asked your parents you'd get the answer: every generation's set of newly-minted adults has trouble asking their parents for advice about how the world works. Ask your parents about the mistakes they made when they were fresh out of school, or recollect the mistakes that you made. I have a great relationship with my folks and am fortunate enough to still be able to lean on them for advice, yet I still make plenty of mistakes. Millennials may refer to it as "adulting", but otherwise it's just m
Re:Try budgeting (Score:4, Informative)
It looks like the subject of the article had his credit cards maxed out all the time yet didn't have an issue knowing how to budget. They were using the money for startup expenses. Considering that they were apparently successful, it seems to have been a workable strategy. The idea that their credit is still bad from having a maxed balance years later seems unlikely though. Credit scores are annoying, but they don't recover that slowly. Either they're exaggerating about still having bad credit, or they're leaving out a detail like having simply defaulted on the credit card debt.
Re: (Score:2)
After the first startup, he worked at Twitter for a few years (according to TFS). So I doubt the original startup was successful. The only thing he did was fail to pay the minimum balance. They don't care if you keep a balance on your card month-to-month (if you keep a balance you're financially illiterate, but that does include the majority of the population). You just have to pay the minimum to avoid ruining your credit. Credit cards aren't free money - they're the most expensive money you can buy.
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Nope, title loans & pawn shops & illegal loans. That is the most expensive money. And in the case of illegal money, may be a health liability as well.
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All of this is really fascinating from an European perspective where every credit card is directly linked to your bank account. Which means that if you are maxed out, you simply call your bank and, if your account has the cash, they raise it. If it has not, then they don’t.
There’s no credit score because, except when buying a house, there’s no credit. People buy thing when they have the money to pay it. Credit card are even sometimes seen as "dangerous"by some because you have don’t
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"There’s no credit score because, except when buying a house, there’s no credit."
Wow. I didn't know all Europeans who buy cars, boats, RVs, planes, or other high ticket items pay cash for them every time.
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While I can't tell you it's impossible to find an edge case that is longer, reported things roll off at 7 years in the US. I have talked to people saying they have had something longer but it always ends up being some sort of domino thing where they keep defaulting and think it should just go away without them actually taking an action.
Re: Try budgeting (Score:2)
That's not fair, you can have a budget and a revolving line of credit, and minus a safety margin for the unexpected, use your credit. It's a service you're paying for, you can account for the interest charges in your budget, and there's nothing wrong with that _if_ you're ok with the expense. You might have to be to get a small business off the ground, or expand. Ideally, you want to get to a point you don't owe interest perpetually, but to get there you might need to spend other people's money. Do you
"The card itself is made of stainless steel" (Score:3)
"but it's meant to be used digitally"
Presumably that means you'll never receive instructions to "destroy your old card." That could be rough on the old shredder.
Points? Vacations? (Score:2)
No wonder America is so credit card dependent.
Use a debit card. (Score:1)
This is stupid. At one time I had poor credit due to not having a credit history. I got a secured credit card from Discover with a $2,500 credit limit and 1% cash back. I spent roughly $25-100/month on the card and put everything else on my debit card. After 8 months my credit score was high enough to apply for other credit cards with higher credit limits and "perks."
TLDR, no one is forcing you to charge everything to your credit card -- you can get a debit card for free from your bank. If you want to
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> I spent roughly $25-100/month on the card and put everything else on my debit card.
At that point, you probably should have simply used just the credit card for most things and paid it off every month. If you have a CC with sufficient limit for your expenses, can manage your finances responsibly, and pay it off every month, you don't need a debit card -- and shouldn't have/use one anyway, they offer fewer benefits and protections than a CC. Just saying it's a strategy worth considering -- I'm debt-free with a high-limit CC, which I pay off every month, and no debit card and my credit sc
Silly rabbit, credit is for car loans! (Score:3, Interesting)
These rich startup shysters really live in their own little world. The reason average people need good credit isn't so they can "sign up for a credit card with lots of rewards and perks", it's so you don't get ass fucked on the interest when you buy a new vehicle.
If you have a decent amount of money in your bank account, you can just put your everyday purchases on a debit card. Yeah, you'll miss out on airline points and what not, but in terms of loss, that's nowhere near as bad as having to pay thousands more on a car loan because the best you could get was an 11% interest rate.
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You obviously haven't bought a car in the last 20 years. If you pay more than 3% APR on your car loan you're getting royally shafted. I have never seen a car loan for more than half the best credit card rates
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While it would help with both, I don't think it is all that different. If you figure on average about $20,000/year of bills per household that can be funneled through a 2% cash back card that is $400/year in benefits. Average car loan is $32k at 5.27% for 5 years. Which makes the total interest paid $4,358 (vs about $9k at 11%). If the car lasts for 10 years than the benefit of average credit seems to be about the same.
This would break down in the bottom 1/3rd as fixed expenses or things paid by an outside
Being debt-free (Score:2)
is the best perk of all.
If you need a high credit limit for non-essential purchases, you are living beyond your means. In fact, I bet a big chunk of your pay check just goes to pay interest on your existing debts. That's no way to live.
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True for us peasants, but when you're working with massive amounts of money, credit card perks can have proportionately massive value - my dad's boss flies around the world on a whim practically for free on credit card perks alone because he runs all his expenses through them, for example.
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Ugh, that should probably read: "my dad's boss flies _tax-free_ around the world on a whim practically for free on credit card perks alone." Credit card perks, cashback, miles, etc. are generally not taxable because they're viewed as rebates, but these are obviously reimbursed expenses. So, he pays say $10,000 and gets $10,000 back from the company to pay off the card before any interest is due and also gets a free flight out of the deal. Technically a rebate, but the company doesn't ask for them to pay for
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You are 100% correct, but it doesn't mean not to get credit cards. I believe the only debt someone should have is their house. With a few exceptions (obviously), anyone who has any other debts besides house is living beyond their means. And that goes for car payments too. If you can't buy your car in cash, drive the cheapest reliable car you can get. That said, in some conditions, it IS ok to get a loan for a car, but ONLY if you have the cash/assets to pay it off fully with no trouble (ie, 401k/retirement
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You can still get the benefits of reward cards while being debt free. I use my CC for all purchases, then pay it off immediately. I've gotten several thousands of dollars from the CC company over the years, they haven't gotten a dime from me ( interest or fees ).
Can help with your credit score too.
Of course, the old adage applies; if you aren't paying for a service, you're the product. I'm sure they sell my purchase history, but they're welcome to it.
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Oh, I know how transaction fees work for businesses. The point is that *I* haven't given my CC company a single cent in all the years I've had the card, whereas they've given me quite a bit in cash back rewards.
I kinda sorta feel bad for businesses that have to pay the transaction fees ( more so with the small businesses than the larger ones ), but that's the cost of doing business.
wut? (Score:3)
So, the guy who brags that he can't manage his personal finances wants to start a finance company? I'm out.
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That proud cluelessness is "the silicon valley twist".
Red flags galore (Score:2)
The marketing has "stay away" written all over it. But I guess I'm not in the target demographic anyway. Not a "tech bro".
Physical cards (Score:2)
It's nice, that stainless steel card. But who uses physical cards anymore? I just use my phone and tap to pay. If it's stolen it can't be accessed (at least not easily.) You would also realize much faster when your phone is stolen and can zero it.
Speaking of tap to pay, why don't they transmit the itemized receipt into the phone when I tap to pay? Also, with all the credit card innovation over 70 years .. how come there is still no way to view itemized receipts online with the credit card balance? At least
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> It's nice, that stainless steel card.
Except when you go through the metal detector at the airport (not joking, happened to me).
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The tap to pay on my Visa actually never works anymore, which is weird. The old style of card that they used to issue worked much better. So I use my Apple Watch now. It's absurdly ostentatious, but it works so much faster and better, I've gotten over it. I just want to be able to pay.
Bank account access? (Score:4, Insightful)
They want to access to my bank account directly?
Fucking nope.
Pointless for "regular" business. (Score:1)
This doesn't solve any of the problems small shops have. The biggest of which is the transaction fee. Disrupt the industry by dropping the transaction fee to 1% and/or allow the transaction fee to be pushed to the buyer's side. Otherwise, unless I'm a high end boutique business I have little incentive to accept the card if it takes even an hour of "paperwork" to be able to accept it.
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In the EU we've had a limit of 0.3% (or 5ct) for a while now. It increased the motivation for a lot of shops to support card payment that used to be cash or debit only before. But good luck trying to get the payment industry to do that without legislation forcing them.
I want some features in the credit card ... (Score:2)
I dont need to give my bank account to Peter to hide my name from Paul.
I want to create virtual cards, give it to merchants and invalidate it at will. Citi card gives me virtual card in such a clunky and useless form. I can use a desktop app or a web pop up window to create a virtual card. Not a big deal, I can do that. But, these cards can't last more than 12 months, each card is tied to one merchant, and subscriptions paid using this card auto renew! The whole idea of virtual card is to stop this auto r
Maybe, for some people (Score:2)
If you manage to put your finances in order it is very easy to get 700+ scores and premium credit cards. But it takes time, maybe about 5-10 years.
So, they aim to shorten this by looking at your cashflows. You have just graduated, had no income and hence no credit prior, and now working at Apple making $200,000/year. And let us give you a premium credit card with $100k limit. No need to wait several years to build credit (and learn how to use it).
What could go wrong?
The card promises 5 times higher credit limits (Score:2)
What can possibly go wrong ?
Re: (Score:3, Insightful)
Seriously. I have no idea what my credit limit is because I pay off my credit card bill each month. I think for 2 months (after I bought my wife's engagement ring ) I might have accrued credit card interest, and that's over my entire life. If you're not paying off your credit card bill each month, you deserve to have a crappy credit score. This "new" card sounds like it'll be a fun mix of financial stupidity from all sides.
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> If you're not paying off your credit card bill each month, you deserve to have a crappy credit score.
Credit scores are used by lenders. A high credit score is not always equivalent to fiscal responsibility. They want to be able to make money on you while also being assured they won't lose money on you.
Credit limits are important to know if you are making a large purchase. Doesn't matter if you pay it off the same month if they won't let you actually make the purchase. I got a deal for 12 months no interest on a card the same day I needed to buy a couple new appliances. Only it's a card I didn't use muc
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I noticed once in the distant past that when I did not pay off the entire bill one month that my credit limit when up shortly thereafter. Of course, it has gone up at other times as well, but the close proximity of those two events really stood out.
I got a sears card once because I purchased a refrigerator there, and X% off the price if you used their cards was a deal. I kep that card for several years but only used it twice since then and finally cancelled it last month. The tiny discount I get isn't re
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Closing credit accounts can also tank your credit score because your total available credit goes down.
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> Closing credit accounts can also tank your credit score because your total available credit goes down.
And the average age of your credit accounts may go down. I just used my Target card for the first time in years because it's one of the first cards I got and they were going to close it due to inactivity in another 90 days.
Re: The card promises 5 times higher credit limits (Score:2, Informative)
Well, i guess it depends on how you look at it. For people trying to build credit, paying it off completely every month does much less than maintaining a balance and making at least the minimum payment.
Of course maintaining a balance also means paying interrst, so theres a middle ground there somewhere.
Re: The card promises 5 times higher credit limits (Score:5, Insightful)
No, that is not how it works.
Yes, you have to actually use your credit, but you don't have to carry a balance. In fact, carrying a balance negatively affects your score.
I get my score from my bank and a couple of CC's on their websites. The higher my overall balance that month, the lower my score at that time. It rarely swings more than a dozen points at a time, but I also rarely use more than 10% of my available revolving credit, and carrying actual debts forward hurts your score even more. The score is a measure of your ability to pay back what you borrow. The more you are borrowing, and the longer you carry the debt the less likely you are to be able to pay back the debt in full, and the more money they need to make off of you in fees before you default.
Now, that is not to be confused with your attractiveness to the cc company. Attractiveness is driven more by the amount of fees you are likely to pay. They will still give you the same upper lending limit (at first anyway), but will hit you with a higher interest rate. And once you've reached the limit they first gave you, so long as you keep making your minimum payments, they will further increase your limit so as to be able to increase your minimum payment (a large portion of which is pure profit for them). If/when you default, they have likely already made more off of you in fees than the principle on the purchases. Combine that with whatever they will get from 3rd party collectors for your debt, and the tax write off they get for selling your debt for a "loss", and they've more than made their money back.
I pay everything off every month (except one card used for large electronics purchases, which comes with 0% APR for the first year). I'm not attractive (few unsolicited offers), but I have a stellar credit score (800+/- 10 points). Means when I want credit I can get it, and at good rates, but they are not going to be beating down my door to offer me a CC. Loans, on the other hand, I get offered constantly.
Re: The card promises 5 times higher credit limit (Score:2)
I'm pretty sure the available credit ratio is what matters, as long as you use it from time to time.
Quick thought experiment, if your credit limit is a cookie jar full of money you leave on the counter for your kids to borrow from, how would you rate their credit worthiness if they
A. Put in what they take before the end of the month.
B. Maintain a balance... as in perpetually owe the cookie jar month over month. As in they owe you money. Forever. It doesn't really matter if they put new money in to repl
Re: The card promises 5 times higher credit limits (Score:2)
My mom literally had just completed a bankruptcy, I cosigned for her to get a credit card, and insisted that she pay it off this way so she won't have to pay interest, basically doing exactly what you're describing. Some 3-4 years after this, her credit score was in the 700s even though she only had a 35k/year income.
Really I don't believe this guy couldn't qualify for better credit cards unless he was still holding on to bad habits.
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My dad drove his business into the ground, and took the family financials with him. He'd never had good credit, and in moment of weakness (on pain meds for a broken limb) my mom co-signed for a personal loan to fund the business. Personal bankruptcy followed for both of them.
Mom had stellar credit before this and within 3 years had several credit cards with low APR and moderate limits. 7 years latter Dad still couldn't get the bank to turn on the credit option on is Chase issued ATM card. By that same poi
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Times change also. I remember when I was in college, getting a credit card approved was a major deal because you had to show you were able to pay off the bills, were financially solvent, etc. Then only a few short years later the whole "pre-approved" credit cards starting arriving in the mail for lots of people I knew.
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I see these ads for companies that will "bring down your credit card debt" Have you got 10,20,50 thousand dollars in credit card debt?
Reminds me of the car insurance companies who send out ads saying they might be able to save you $700 on your car insurance.
WTH??!! My insurance isn't in the same country as that amount. What kind of insurance rates are these people paying?
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What he said. I pay off my credit card bill every month, never carry debt over. Not a clue what my credit score is, mind you. And not sure I really need to know, until and unless someone I'm doing business with says words to the effect of "I'm sorry, but you don't have enough credit to buy that"...
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> What can possibly go wrong ?
They are targeting an tricky market segment.
For every responsible person who simply happens to have a bad credit score, they are going to find a 100 people who just have a bad credit score.
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His market segment is people who have plenty of cash, but can't really explain the source of the funds. What type of people might that be?