Petal 2 Credit Card Review: A Fee-Free Credit-Building Alternative - NerdWallet (2024)

Pros

Cons

The Petal® 2 Visa® Credit Card may be an ideal option if you want to avoid fees as you start the clock on your credit history. Unlike many starter cards, no security deposit is required, nor will you pay an annual fee to hold the card.

Plus, Petal's issuing bank, WebBank, can look at more than just traditional FICO scores to determine creditworthiness. The bank has an algorithm that can take into account things like income, savings and spending. The card even offers a cash-back rewards program comparable with those on cards for people with good to excellent credit.

Petal® 2 Visa® Credit Card: Basics

Annual fee: $0

Security deposit: None.

Rewards: Up to 1.5% cash back on all purchases. Details:

Plus, up to 10% cash back when you use the card to make purchases with select merchants.

APR: The ongoing APR is 18.24%-32.24% Variable APR.

Penalty APR: None.

Foreign transaction fee: None.

Other perks:

Petal® 2 Visa® Credit Card vs. other Petal cards

As the number in its name would suggest, the Petal 2 isn't the only card in the Petal lineup. Petal and WebBank also offer the Petal® 1 Visa® Credit Card and Petal 1 Rise.

You don't really need to worry about "choosing" between the Petal cards; the one you're eligible for will hinge on your credit history or cash flow. (Petal’s pre-qualification process will confirm which option, if any, is a match for you.)

Here's how the cards stack up:

ANNUAL FEE

INTRO APR

REGULAR APR

ANNUAL FEE

INTRO APR

REGULAR APR

ANNUAL FEE

INTRO APR

REGULAR APR

Evaluation based on multiple factors

You must be a U.S. resident with a valid Social Security number or an individual taxpayer identification number to qualify for the Petal® 2 Visa® Credit Card, but Petal's issuing bank may opt to weigh more than just your credit scores. It can also evaluate creditworthiness with an algorithm that also analyzes your income, savings and spending, according to co-founder and CEO Jason Gross. You’ll have to link your bank account to provide this information. Petal will have read-only access and won't keep your login credentials, according to its website.

No security deposit

Many cards designed for those with limited credit are secured products, meaning they require an upfront cash deposit as collateral, usually at least a few hundred dollars that's equal to your credit limit. You get the deposit back when you close the account (or upgrade it to an unsecured card), but it's money you've got to come up with on the front end. The Petal® 2 Visa® Credit Card has no such requirement.

A solid rewards program

The 1.5% maximum cash-back rate on the Petal® 2 Visa® Credit Card equals the ongoing rate on stalwart cards like the Capital One Quicksilver Cash Rewards Credit Card and the Chase Freedom Unlimited®. You'll need a year of on-time payments to work your way up to the top rate, but even the 1% base rate is better than what you'll get on most starter cards.

No fees

Petal® 2 Visa® Credit Card cardholders pay no fees. That means a $0 annual fee, no late fees, no foreign transaction fees or any other fees. You also won't be charged a penalty APR if you're late on a payment (although paying late can affect your credit scores). The company makes money from merchant transaction fees and interest paid on revolving balances. You can avoid interest charges by paying your bill in full every month. Paying on time will also keep your credit scores in good shape.

Worthy travel companion

The Petal® 2 Visa® Credit Card is a travel-friendly card that can save you money when you’re abroad. It has no foreign transaction fees, which generally range from 1% to 3% per transaction for other credit cards. As a Visa card, it also has broad international acceptance.

No bonus rewards

When you're new to credit, rewards aren't the most important thing — building credit is. But rewards are still a factor, and it's worth weighing your options. Flat-rate cash-back cards like the Petal® 2 Visa® Credit Card are popular because they require minimal effort. But a card that offers bonus cash back in certain categories might be a better fit for your spending. For instance, the Deserve® Pro Mastercard is designed for applicants with established credit, but the company's underwriting process may allow exceptions for those who can meet income and employment verification criteria. The card earns 3% cash back on travel and entertainment and 2% cash back at restaurants, on up to $500 in combined purchases per billing cycle. For all other purchases, it earns 1% back.

No cash advances

Cash advances are short-term loans that you can get at a bank or ATM with your credit card. They can end up costing you dearly in fees and interest, but just know that if you happen to be in need of cash quickly, you won’t be able to draw any against the Petal® 2 Visa® Credit Card. The AvantCard Credit Card — another card designed for thin credit files — does offer cash advances, but again you'll pay for those, and you'll also owe an annual fee of $39.

Permanent minimum payment due date

Petal doesn’t allow you to change your minimum payment due date. If that’s a deal breaker, the Capital One Platinum Secured Credit Card lets you choose a date that works for you. That card does require a security deposit, but for those who qualify, it might accept one as low as $49.

Cost uncertainty

As noted above, a number of Petal cardholders who had been paying no annual fee were notified in mid-2023 that the terms of their account would be changing or that they were being moved to a different card entirely, so they would now be paying fees. As of June 2023, Petal's website said only that "Card fees and terms may vary for members acquired prior to 5/16/23."

You can review NerdWallet's list of the best credit card offers to see how these cards compare with each other.