Zerocard 101

Borrowing, Checking & Savings Accounts, Credit Cards, Investing & Retiring

You prefer the simplicity and the spending limit security of a debit card, but you also like the cash-back rewards associated with credit cards. Zero, a San Francisco financial startup, may have the perfect card for you.

The Zerocard is a unique blend of debit and credit card. Zero’s full package is composed of a credit card, a corresponding checking account, and a mobile app that serves as an interface between the two. (The mobile app is currently only available on iOS, but an Android version is expected by August 2019.)

To get the hybrid credit and debit card experience, you must activate the automatic payment feature. Instead of accumulating charges like a typical credit card, Zerocard simply deducts the charged amount from your Zero Checking account. The app allows you to track both the charges and your net checking account balance in real time.

You’ll still receive a monthly billing statement, but with the automatic payment feature, the charges have already been paid. The billing statement acts more like a receipt.

The Zerocard has no annual fees, maintenance fees, or foreign transaction fees, making it attractive as a baseline rewards card. However, Zerocard’s biggest drawback may be the high spending levels required to earn significant rewards.

The introductory Quartz level card gives you 1% cash back on all purchases, with no minimum spending requirements. The Graphite card provides 1.5% cash back along with 0.5% extra cash back on the average difference between your Zero checking account and your Zerocard balance (known as your “Current Position”). However, to earn the Graphite card you must either spend $25,000 annually or refer one friend who becomes a Zero customer.

The next two levels of rewards have higher thresholds. The Magnesium card gives 2% cash back on purchases and 1% in annual rewards on average Current Position, but you must either spend $50,000 annually or refer two new Zero Customers. The Carbon card offers the highest rewards possible, with 3% cash-back and 2% in annual rewards on Current Position – if you refer 4 new customers or spend $100,000 annually.

In addition, the higher status must be re-earned periodically, just like with preferred status travel programs. Once you earn the higher status, you keep that status for the rest of that calendar year and through the end of the next one – but you must re-earn that status during the calendar year before it expires.

If you’re thinking of achieving the high spending levels by combining business and personal expenses – don’t. Zero doesn’t allow business expenses. Their system contains an algorithm to “flag patterns inconsistent with personal use.”

Zerocard isn’t for everyone. If you don’t want to sign up for automatic payments, you’ve neutralized the main advantages of Zerocard – and if you’re secure in your spending practices and spend at the levels that earn 2% or 3% cash back, you can probably do better with traditional credit cards.

However, if you want to build credit but are concerned that you’ll overspend – or you like the simplicity of monitoring your spending and balances through a single app – Zerocard is an excellent choice. The lack of fees and security of automatic payments through the Zero checking account provides a low-risk credit-building path while offering decent rewards. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

The Zerocard is finishing a trial period with a limited number of customers. There are over 200,000 other customers on the waitlist, according to a recent article. Within a few weeks, Zero expects to admit waitlist consumers – so your opportunity to try out Zero should be coming soon.

If you want more credit, check out our list of credit card offers.

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