Fintech startup Upgrade Inc. is launching a credit card product with one important twist.
Upgrade Card is set up more like a home equity line of credit. In partnership with Cross River Bank, Upgrade will offer personal credit lines through its new Upgrade Card between $500 and $50,000. But at the end of the month, any charges on the card are automatically combined into an installment plan with a fixed interest rate payable over 12 to 60 months.
"It really has the same low cost, discipline and predictability of an installment loan while giving the flexibility and convenience of a credit card that you can use anywhere," Upgrade co-Founder and CEO Renaud Laplanche said in an interview. Such a product has not previously been offered to U.S. consumers, he added.
Upgrade, which primarily operates a consumer credit platform, has been planning a product like this credit card for a while, Laplanche said. Since the entrepreneur started LendingClub Corp. more than a decade ago, nationwide credit card debt has only increased, now clocking in at more than $1 trillion. Laplanche hopes to lessen the financial burden for customers who pay the minimum deposit each month.
"The Upgrade Card is designed for people who, from time to time, use the credit features of the card," he said. "They're not just using the card to transact and pay it off, but they're really using the card to buy something expensive that they want to pay off over several months."
With the product, Upgrade targets consumers who are looking to buy bigger-ticket items such as a laptop or new furniture. That is because Upgrade Card does not offer fancier features than a credit card like those offered by JPMorgan Chase & Co., the CEO said. Its benefit is the fixed installment loan payment plan feature, which has an annual percentage rate from 6.49% to 29.99%.
Upgrade also plans to launch a rewards program associated with the card, allowing customers to earn rewards for paying down their balance instead of getting rewards for spending money. Though no launch date has been set, Laplanche said the program will roll out before the end of the year.
In choosing a bank partner, Laplanche looked for a bank with a "strong culture of compliance" as well as the "spirit of innovation," both of which the executive said he found at Cross River.
The small Fort Lee, N.J.-based bank often partners with fintech companies including Affirm Inc., Upstart Network Inc. and Quicken Loans Inc. But its launch of Upgrade Card is different from products it has offered in the past, which were more one-shot loan offerings.
The Visa Inc. Upgrade credit cards will be issued by Sutton Bank.
