NerdWallet, a personal finance site that compares consumer financial products, has launched its own credit card.
NerdUp, a secured credit card that the company announced on October 26, is a perplexing choice on the surface because it seems to open the door to a conflict of interests. NerdWallet ranks and reviews credit cards in different categories and assigns them star ratings. It also accepts compensation from its financial institution partners, which include American Express, Bank of America, Capital One, Chase, Citi, Discover and Wells Fargo. This compensation may affect which products NerdWallet reviews and where their products appear on the site, although partners can’t pay their way to favorable reviews, according to the advertiser disclosure.
Nevertheless, NerdWallet says it is filling a gap it uncovered by observing user activity: Many people who come to the site don’t qualify for offers. NerdWallet is pitching a secured card with no credit check. As that card usage gets reported to the credit bureaus, the product could help people with low credit scores qualify for more offers advertised through NerdWallet in the future. It is also intentionally separating its direct-to-consumer product from the comparison aspect of the business to avoid potential bias.
“We didn’t strive to offer financial products historically, nor did we want to compete with our partners,” said Caitlin Barber, general manager of cards at NerdWallet. However, “we saw a lot of users coming to NerdWallet that don’t qualify for what we have on our site.”
To avoid conflict with its financial institution partners, NerdWallet will not include its NerdUp card in its roundups or assign it a star rating; instead, it will surface the card for users who cannot be matched with other offers. Barber believes the secured card can benefit its existing bank and credit card partners, because over time it can help more people become eligible as they improve their credit.
Tony DeSanctis, a senior director at Cornerstone Advisors, points out that offering a secured credit card gives NerdWallet credibility with consumers. It lets NerdWallet position the card as a way to help consumers build credit, similar to what fintechs such as Chime and Current have done with their own such products.
Moreover, “my guess is this is the least profitable piece of their affiliate marketing space because secured cards are so challenging to be profitable,” he said. “Most of the products they’re promoting will be higher value cards.”
The card does not charge annual or monthly fees and requires a minimum deposit of $100, although users can raise the limit up to $10,000. It will also return 1% cash back on purchases, which DeSanctis believes is unique.
At the same time, he questions the economics of a 1% cashback rate, “which to me seems aggressive, if not irresponsible,” he said, pointing out that NerdWallet is giving up a large chunk of interchange income.
“If it differentiates it’s going to be on that cashback,” he said. “My guess is that will make the profitability of the product questionable.”
Barber acknowledges this card won’t be a big money-maker for NerdWallet out of the gate.
“We’re not anticipating a near-term material impact,” she said. “We want to help consumers build credit history, then be eligible for the offers we currently have with our partners. It brings consumers into our ecosystem so we can establish a meaningful relationship with users that previously we didn’t serve very well.”
NerdWallet is not paying to market the card through social media or search advertisements.
“We have a huge SEO footprint,” she said. “We have a ton of people coming for all sources of financial services, particularly in the credit card space. We don’t need to market it because we have this huge user base.”
The company started discussing the idea in the first quarter of 2023 and began conversations with embedded finance platform Bond soon after to get the project up and running. The NerdUp card is issued by Evolve Bank & Trust, which is headquartered in West Memphis, Arkansas, and has $1.5 billion of assets.