The average American’s wallet has more cards than a dealer at a Las Vegas casino.
It’s been found that the average person has four credit cards in addition to a debit card, driver’s license, and a plethora of other membership cards. On top of that, Lending Tree estimates that the average American has around $5,700 worth of credit card debt.
In other words, credit cards are a problem in America.
Grain is looking to solve these problems by turning your debit card into a credit card.
How does it work?
Before they founded the company, the creators of Grain experienced their fair share of issues with credit cards:
“We’ve fallen into the bait and switch traps of the credit industry ourselves – spending years paying off large amounts of bad debt at high-interest rates, which is why we built something better. A platform that puts your interests before shareholder bottom-lines.”the grain team
To solve this problem, the founders believed that it’d make sense to turn users’ debit cards into credit cards.
They do this by analyzing the income within your checking account and then extending an appropriate amount of credit based on that income. This keeps you from having access to more credit than you need and piling up mountains of debt.
That credit line is then accessible through your debit card.
Ultimately, Grain forces you to use credit responsibly thus increasing your credit score.
The app uses 256-Bit encryption which gives you bank-level security. The startup also promises to never share your data to third-parties.
Grain’s APR on your credit line currently sits at 12%. This is quite a bit lower than the average APR on most credit cards; somewhere between 15-20%.
How does Grain make money?
Although it’s not explicitly stated on their website, they seem to be using a similar model to other financial institutions.
The company makes money off the interest charged on your use of the credit line. However, the startup also makes money off the fees they charge when a user gets a cash advance. According to the website, there is a 1% finance charge when someone withdraws cash against their credit line.
Grain is a great solution for those looking to consolidate the number of cards they have in their wallet. However, it seems like keeping a credit card open that has the highest credit limit would be a smart idea in case of an emergency expense. Hourly workers may not be extended a high enough credit line to cover large emergency expenses should they arise.
Generally speaking, Grain will encourage responsible spending and help increase users’ credit scores which is a plus in my book.