A startup called Zero has plans to launch a new product that acts as a hybrid between a credit card and debit card after successfully raising 48.5 million with ENIAC Ventures
In the near future, customers can sign up for a Zerocard and account, deposit money, and make purchases just like they would with a debit card; however, spending with a Zerocard also yields something else.
The Zerocard will offer the same type of benefits as a normal credit card, and customers can earn regular cashback rates between one and three percent. The beginner product is the Zero Quartz Card offering one percent cash back. Higher cash back rates are offered as you move up the chain to elementally-named products: Zero Graphite (1.5%), Zero Magnesium (2%), and Carbon (3%).
Despite forgoing costly, typical credit card fees, Zero can afford to offer these rates by forgoing traditional brick-and-mortar locations. They are also minimizing their advertising costs – customers can increase their rates by referring new customers to Zero and by meeting the minimum spending limits.
However, customers will not be able to use a Zerocard with their existing bank accounts; rather, they will be required to sign up for a new checking account through Zero. The checking account will be available through an FDIC-insured partner bank.
Additionally, the company plans on offering an app that updates all payments, deposits, transfers, and balance totals in real time, in one place. According to Zero’s CEO Bryce Galen, the Zerocard eliminates a customer’s risk for getting into debt because they only spend the money they already have.
Zero’s unified banking experience is a unique idea in an industry that has historically been resistant to change. Debit cards used to offer rewards until new regulations were introduced following the financial crisis in 2008. These regulations capped debit card interchange fees so most banks can’t finance the cost of a rewards program, effectively ending debit card rewards incentives.
Despite this, many people still prefer debit cards; only 33 percent of adults between the ages of 18 and 29 own a credit card. The biggest reason that most people forgo a credit card is out of concern for accruing long-term debt. Even customers with strong financial habits are statistically more likely to overspend with a credit card. Plus, the interest rates on many credit cards are high, relatively speaking.
Zero attempts to crack this stigma by attempting to offer an easy-to-use, understandable product that could potentially offer the best of both worlds. The Zerocard would be the first to offer the functionality of a debit card while still giving cashback rewards like a credit card. And Zero stands out as the first company to design a card with the goal of minimizing consumer debt. Depending on the success of the Zerocard, more companies could follow suit in the future.
Headquartered in San Francisco, Zero currently has 12 employees. The Zerocard is set to launch in 2018, and the company claims it has a waiting list of 150,000 people. As mentioned, Zero recently raised $8.5 million in a funding round that was led by ENIAC Ventures.
Author: Andrew Rombach
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