It looks like Green Dot is looking to try and enter the credit card market again. Green Dot CEO Steve Streit stated that they would offer a secured & unsecured credit card product in their most recent earnings call.
Secured Card
You put up a deposit in the bank that’s equal to the credit line, and then you take the card and you use it. And the barrier to that product, really hitting it large on the mass scene is it’s hard for low- and moderate-income Americans who are prone to use that kind of a product, to deposit the cash into the bank. In the case of Green Dot, we have 100,000 retail locations, where you can deposit cash by swiping your card. And our consumers and folks in our demographics who are familiar with our products and services know how to do that, right? So the opportunity for us to help people get on the map with their credit score have a safe product that they can’t fail at with very — Green Dot style
I don’t think it’s particularly difficult for consumers to currently get access to a secured card. In the majority of cases it’s not necessary for consumers to go into a brick & mortar branch to deposit cash to set up their security deposit. This is more marketing spin that substance.
Unsecured Card
Green Dot is planning on offering an unsecured card, presumably to existing customers of Green Dot.
…we have some really cool data on about 25 million Americans who have used our bank over the years. And that data can help us underwrite for an unsecured line of credit.
…in America today, FICO scores are not what they used to be. And in our demographics, they were never good to begin with and they’re not much better about now for sure.
This is not much different from how traditional brick & mortar banks operate. If you’ve held a deposit account with them in the past it’s much easier to get approved for an unsecured credit card because they can determine what type of customer you are without having to rely on traditional credit scoring models.
Final Thoughts
This isn’t the first time that Green Dot has tried to enter the credit card market, back in 2006 they attempted the same thing by issuing credit cards at Rite Aid locations. No credit check was done and you were approved as long as you could verify your identity. The downside? There was an annual fee of $70, a monthly fee of $4.95 and the credit limit was only $200. That would make it one of, if not the worst credit card currently on the market. In fact, that card is so bad that it would be illegal if it was issued today.
I don’t think either of the credit card products that Green Dot plans to offer will be competitive. When it comes to secured cards the best products are no annual fee cards (not low fee like Green Dot are planning) like the Discover it secured, any of the cards offered by FNBO or the Harley Davidson offered by U.S Bank [Read: Best secured credit cards].
Because their unsecured product will be aimed at those with existing history with Green Dot even if it is a compelling product and I can’t imagine it will be, it won’t be accessible to the majority of consumers. Hopefully this time Green Dot can focus on providing a working product that isn’t laden with fees.
Green Dot has been struggling with tampering of their prepaid cards recently and has launched “load at the register” cards to help prevent this tampering. The CFPB also proposed some new rules for prepaid products.
Via pymnts.com
