The week of June 12, some holders of the Petal® 2 “Cash Back, No Fees” Visa® Credit Card* received a Change in Terms Notice that their cards will be downgraded to a version of the Petal 1 Rise Visa® Credit Card*, which will come with an $8 monthly membership fee (equal to $96 annually) and other added fees. According to Petal, the change will take effect on Aug. 1, 2023, unless Petal 2 cardholders opt out of the account change.

Bankrate originally obtained a copy of the Change in Terms Notice** from Petal’s website, but it has since been removed. According to Petal, this document was an early draft of the correct version of the Change in Terms Notice for affected Petal 2 cardholders, and it was not intended to be publicly viewable. Bankrate requested that Petal share the correct version of the Change in Terms Notice, which can be viewed here.

According to a Reddit thread on the subject, numerous existing Petal 2 cardholders have been affected by this downgrade. Those affected report having received notice via email or after logging in to their account. Cardholders on the Reddit thread have lamented that their only opt-out option appears to mean closing their Petal 2 accounts, and that they were unable to switch to a no-annual-fee card.

When asked for comment by email, Petal stated that “[t]his change applies only to this specific segment of existing Petal 2 members. It does not apply to all Petal 2 members, and it does not apply to new Petal 2 applicants. For new applicants, and those who were not notified of a change, Petal 2 continues to be a card with no fees whatsoever.”

This is also not the first time Petal issued a change in terms for Petal cardholders. In May 2023, Petal issued a similar change in account terms for select Petal® 1 “No Annual Fee” Visa® Credit Card* holders.

What’s changing for downgraded Petal 2 cardholders?

The Petal 2 is marketed as a “Cash Back, No Fees” credit card — it includes no annual fee, late fee, returned payment fee or foreign transaction fee. For Petal 2 cardholders affected by the account downgrade, this “no fee” status is changing.

Affected cardholders will have their Petal 2 account replaced with a new Petal 1 Rise account, effective as of the date on their Change in Terms Notice. New account changes include:

  • $8 monthly membership fee ($96 annually)
  • 3 percent cash-like transaction fee (minimum $10)
  • Up to $40 late payment fee
  • Up to $29 returned payment fee

Petal 2 cardholders who don’t opt out of the account change will receive a new Petal 1 Rise card. As of the effective date, cardholders will be charged an $8 monthly membership fee, which will appear on their monthly statement each billing cycle.

According to Petal, with the Petal 1 Rise, downgraded Petal 2 cardholders will still retain their Petal 2 cash back rates, current APR for purchases and no fee on foreign transactions.

Note, the Petal 1 Rise Visa Credit Card typically comes with a $59 annual fee (however, Petal states card fees and terms may vary for members acquired before May 16, 2023), 2 percent to 10 percent cash back at select merchants, an up to $40 late payment fee, an up to $29 returned payment fee and no foreign transaction fees.

How downgraded Petal 2 cardholders can respond

If affected cardholders accept the Petal 2 account change to the Petal 1 Rise, no response or action is needed. But it’s a good idea for affected cardholders to read over their specific Change in Terms Notice carefully.

Otherwise, it appears that the only way for a cardholder to opt out of the Petal 2 account change — and avoid the monthly membership fee and other added fees — is for them to close their Petal 2 account.

Cardholders can close their account in one of three ways:

  • Through the Petal app
  • Via email at
  • Calling Petal’s support line at 1-855-697-3825

To close the account through the Petal app, cardholders can head to “Settings,” then to “Important account changes” and then “Close your account.”

Many Petal 2 cardholders on the Reddit thread have expressed dismay at the account changes. At least one Reddit user has suggested that cardholders impacted by the changes consider submitting complaints to the Consumer Financial Protection Bureau and the Better Business Bureau.

Considerations before closing a credit account

Since the change in terms takes effect on Aug. 1, 2023, impacted cardholders have at least a little time to consider the decision. Before closing your account, remember to pay off your balance and redeem any cash back you’ve earned. If you fail to redeem your cash back before you close your account, you will lose your rewards earnings.

Be aware that closing your account can negatively impact your credit score due to a reduced length of credit history and, potentially, an increased credit utilization ratio. The degree of impact on your credit score will vary depending on your financial circumstances. Still, it’s worth closing an account that has a monthly or annual fee if you no longer use that account or if you don’t want to pay an annual fee. However, paying an annual fee may be unavoidable if you’re rebuilding your credit.

Before closing your account, it would be best to apply (and get approved) for a new credit card that you qualify for. Although a hard inquiry on your credit report from a new application will cause your score to drop a bit, you’ll ultimately benefit from having an additional line of credit to replace the account you’ll be closing. It’s also best to avoid applying for too many credit cards in a short span of time.

If you use credit responsibly and have good-to-excellent credit, you may qualify for one of the best rewards credit cards on the market — many of which come with no annual fee, competitive rewards rates, sign-up bonuses and other card perks.

Final thoughts

In the Reddit thread, many affected Petal 2 cardholders were confused as to why their accounts were being downgraded. Many cardholders claimed that their accounts were in good standing, they never missed a payment and their credit scores were in the good-to-excellent range.

When asked for comment on these claims, Petal responded: “We are not able to share specific details regarding the criteria leading to a change in terms.”

According to Petal, the Petal 1 Rise is for credit builders with “low-to-fair credit,” while the Petal 2 is for those with “fair-to-good credit.” The Petal 1 Rise also typically charges a $59 annual membership fee, which is significantly less than the $96 annual membership fee ($8 per month) that downgraded Petal 2 cardholders are now expected to pay for their new Petal 1 Rise accounts. So, the question remains: Why are Petal 2 cardholders — who are supposedly in good standing — being downgraded to a credit-building card with added fees?

For Petal 2 cardholders who originally got this card to build their credit, this is a serious setback. Not only are they being downgraded to a less-desirable card, but they’re now going to be charged a monthly membership fee, along with other fees (as applicable), on an account that was originally advertised as being a “no fees” card. If cardholders decide to close their account, their credit score will be negatively affected, albeit temporarily, which defeats the purpose of why many consumers got the card in the first place — to build a good credit history.

*All information about the Petal® 2 “Cash Back, No Fees” Visa® Credit Card, Petal 1 Rise Visa® Credit Card and Petal® 1 “No Annual Fee” Visa® Credit Card has been collected independently by and has not been reviewed or approved by the issuer.

**Updated June 27, 2023: This article has been updated to reflect the correct version of the Change in Terms Notice that was shared with affected Petal 2 cardholders, which Bankrate received directly from Petal. Bankrate originally obtained a copy of the Change in Terms Notice for Petal 2 cardholders from Petal’s website, but the document has since been removed. According to Petal, this document was an early draft of the Change in Terms Notice for affected Petal 2 cardholders, and it was not intended to be publicly viewable as it contained inaccurate information. Specifically, the draft of the Change in Terms Notice that Bankrate originally obtained stated that account changes, including the first monthly membership fee, would go into effect starting July 1, 2023. According to Petal’s direct statements and FAQ page, account changes for affected Petal 2 cardholders will go into effect on Aug. 1, 2023, and the first monthly membership fee will appear on cardholders’ August 2023 monthly billing statement.