Petal credit card and app
Courtesy of Petal

Fintech startup Petal wants to change the way you build credit, and it’s starting with how you earn rewards. The company has announced a new cash back rewards program that increases your cash back percentage when you pay your bill on time each month.

Starting this month, both new and existing Petal cardholders will earn 1 percent cash back on every purchase. After paying on time for six months, it will increase to 1.25 percent. After another six months, it will increase again to 1.5 percent cash back on every purchase. A missed payment won’t derail your progress — the month in question simply won’t count towards your next increase.

The new program launches May 14, 2019, but those who already have the Petal card will earn “retroactive” rewards on all purchases dating back to May 1, 2019. Cash back earned never expires and can be redeemed as a statement credit (or a mailed check, upon request).

Normally, those who are just starting to build credit would have to upgrade or apply for a new card in order to take advantage of a higher rewards rate. Petal, on the other hand, sees this as an opportunity to keep customers long-term while helping them establish healthy habits.

Helping customers establish healthy credit habits

The addition of this dynamic rewards program makes Petal one of the more competitive starter cards on the market, built for pretty much anyone who has a limited credit history and is looking for a simple way to build up their credit history, earn rewards and track their spending.

One of the more unique features of the card is the ability to set a spending limit each month that is lower than your credit limit. This option is great for those who are nervous about the temptation of spending too much on their credit card each month. For example, if you know you only want to spend $300 this month on your credit card, you can set that as a spending limit in the app — even though your credit limit might be $1,000 — to help you stay on track.

“Credit cards make it tempting for people to spend without thinking about how it impacts their budget. We wanted to create a feature that helps people be more conscious about that,” a Petal spokesperson said in an FAQ. “People can use [this feature] to create a spending plan, identifying how much they want to spend on the card to meet their own financial goals.”

Setting a spending limit lower than your credit limit also helps make sure that you’re keeping your credit utilization ratio low, which can help your credit score.

Cardholders can also use the Petal app as a more holistic financial planning tool, connecting multiple credit card and debit accounts similar to apps like Mint.

Perfect for students and new grads

Those who are financially responsible enough to manage a rewards card but lack the credit history to get approved will find a lot of value with the new Petal rewards program. It’s offering a simple way to earn rewards, track spending and build a healthy relationship with managing your finances. For students just jumping into credit, the card can also act as an educational tool to establish good habits.

“I like what Petal is doing,” comments Ted Rossman, credit card analyst for Bankrate. “They’re solving a big problem – the difficulty that many responsible young adults experience in obtaining a credit card, simply because they lack a credit history. Petal offers a unique value proposition that includes generous credit limits, competitive interest rates and no other fees. Now that they’re offering a solid rewards program, they’re giving their cardholders a reason to stick around even longer.”