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Rewards credit cards typically come in two basic flavors: cash back and travel — useful if you want to save money without couponing or spend less on that annual visit to the in-laws.
But a number of new credit cards are reimagining the role a rewards program could play in your life. These cards can help incentivize certain behaviors, or allow you to fund a hobby or investment account. They may offer rewards on spending that isn’t covered in the typical grocery-restaurant-travel triad, like rent payments or home fitness equipment. And while they might not be as rewarding as a premium card with a massive sign-up bonus, they offer a greater degree of personalization.
‘New ways of thinking’
The startups that create these cards are competing against major credit card issuers, which is no easy feat. While they lack the brand recognition and deep pockets of big banks, they have one thing in their favor: speed. Some financial startups rely on the services of other tech companies that provide the infrastructure (including selecting the bank partner and payment network, and establishing underwriting guidelines) for launching a new credit card. That makes it easier to turn an idea into reality.
“You’ll see that more of these interest-based cards come out because issuing a card is no longer as big of a lift,” says Ben Reid of M1 Finance, a personal finance startup with its own new credit card that targets investors.
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How well this flood of new cards performs is another story. They all face a crowded credit card marketplace with lots of competition.
“The challenge that, frankly, we’ve experienced is it’s really hard to break through, and it depends on your demographic,” says Matthew Goldman, chief product officer at Apto Payments, a payments infrastructure company. Goldman’s startup created the Grand Reserve World Mastercard,
a card designed for wine lovers. He found that people who are willing to spend hundreds on rare wines tend to have high incomes and credit scores, which would make them eligible for a wide array of premium cards.
No matter what, however, these kinds of cards will shake things up. “The thing that’s exciting about startups is most products won’t succeed,” Goldman says. “But they’re creating new ways of thinking about things.”