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Last updated on December 23rd, 2020
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At a Glance
The ZeroCard is a hybrid credit card that combines the convenience of a credit card with the comfortable familiarity of debit. Designed for Millennials wary of falling into credit card debt, Zero is the no-fee option that makes it almost impossible to overspend.
Ideal for Those Who:
- Have never used a credit card before or are intimidated by credit
- Exclusively use a debit card for purchases to avoid falling into debt
- Prefer to pay balances in full each month and don’t rely on grace periods
- Hate paying interest charges
- Want flat-rate cash back rewards
- Have a strong network of friends
The Zerocard (also referred to simply as “Zero”) is unconventional. Issued by WebBank and backed by Mastercard, Zero blurs the lines between credit cards and debit cards with a unique product meant to offer the best of both worlds. The goal? To help wary Millennials overcome their fear of credit cards—or, more accurately, credit card debt—while also earning up to 3% in cash back rewards on every purchase.
The guiding principle of this card’s methodology is, “You can’t spend what you don’t have.” In efforts to help users curtail any purchases they cannot immediately afford, Zero works in conjunction with their coordinating checking account, Zero Checking, to create a totally new kind of credit card experience. It combines the real-time balance display of a debit account with credit card usage—if you make a purchase on the Zerocard, it will automatically detract from your balance, but the money will go untouched until you actually make a payment.
The Zerocard is fee-aversive and does without many commonplace charges that traditional credit cards carry, like annual fees and cash advance fees. However, it does not mean that balances won’t incur interest. Also, above-average APRs could be off-putting since Zero requires healthy credit scores that could likely qualify for better rates elsewhere.
About the Makers of Zerocard
Zerocard is virtually brand-new; it launched in 2019 as the newest creation from fintech company, Zero Financial. As would be expected from a modern and digital-based product, the Zerocard is rooted in mobile use and requires having the Zero app in order to apply.
Signup Bonus & Introductory Offer
The Zerocard does not offer any bonuses or special rates for new cardholders.
Zerocard’s commitment to modern simplicity starts with its notable absence of fees. Besides having no annual fee (which isn’t difficult to find nowadays), it also lacks a foreign transaction fee (also fairly common), but most exciting is the absence of a balance transfer fee or cash advance fee (extremely rare).
Normally, the lack of a balance transfer or cash advance fee would make this card a powerful financial tool for paying down debt or overcoming financial hurdles. However, the APRs for such transactions are high and without an introductory bonus either, this lack of fees is markedly less attractive and less useful. Zerocard is not the first card of its kind to offer a credit card with little to no fees. However, it is important to note that failure to pay off the statement balance will cause interest to incur.
Zerocard Credit Limit
The Zerocard does not provide hard and fast credit limits, and there are no preset spending limits. This is more akin to American Express’ method – where cardholders are instead assigned “spending power” – than a defined cap. The lack of a credit line does not mean that spending is unlimited, however. Zerocard credit “limits” appear to be fluid and fluctuate based on use of the Zerocard, payment history, current account balance, and other features. Cardholders can check their purchase potential through the Zero app to see whether a particularly large transaction would be approved or not.
Mandatory Zero Checking Account
Zero Checking plays a huge role in the functionality of the Zerocard—in fact, it’s impossible to use the card without it. For this reason, all approved applicants are automatically enrolled in Zero Checking at no additional cost. There is no minimum balance or monthly deposit requirement (direct deposit not mandatory), nor any maintenance fees. Still, this is far from a low-maintenance checking account. As of now, the Zero Checking account is rife with constraints. The limited functionality prevents it from being used for everyday transactions and could make it an unattractive option for use as a primary checking account.
- No mobile deposit for checks (in development)
- No wire transfers (in development)
- No paper checks
- No ATM network (in development)
- No Bill Pay feature (in development)
- Debit card withdrawals are limited to $5,000 a day and $300 by ATM
- Funds cannot be deposited via ATM
Although several of these limitations are in the works, potential applicants might be better off waiting for Zero Checking to fully develop all its capabilities. Currently, the only way to use this account for payments is through ACH transactions, which require using the routing and account number to facilitate the transfer of funds. This is a non-traditional checking account and cardholders should be wary of tying their direct deposits to a checking account with such limited functionality.
Earning Rewards with Zerocard
New Zero cardholders will start out with the base earning rate: 1% cash back on all qualifying purchases. This cash back rate can be increased up to 3% depending on the Zerocard “tier”—but earning the higher reward levels may be easier said than done. Non-qualifying purchases include the following:
- Peer-to-peer payments
- Loan payments
- Travelers’ checks
- Manufactured spending (purchases made solely to earn rewards such as gift cards and other cash equivalents)
- Balance transfers
- Cash advances
- Any other account fees
Earnings are awarded on the date that a transaction is posted rather than the day the transaction may have taken place, which may affect the billing cycle with which earnings are accrued. Unfortunately, unused earnings expire after 3 years from the date they were earned.
Zerocard Reward Levels & Referral Requirements
There are four tiers of the Zerocard: Quartz, Graphite, Magnesium, and Carbon. Each level has a higher cash back rate than the previous one and will award cardholders a different colored card. Moving up through these levels requires a certain number of referrals or meeting a minimum spending threshold. However, these spending minimums are very high, making them an unrealistic means of tier advancement.
A successful referral (“Qualified Referral”) is more than someone who simply applies for the Zerocard. There are two criteria that must be met before they can be counted towards the referrer’s quota:
- Applies through a referral link/share code and is approved
- Receives a direct deposit of at least $300 into their Zero Checking account within the first 60 days of opening an account (peer-to-peer transfers do not count)
For those who successfully meet the requirements to move to a higher level, the perks are relatively short-lived. Cardholders will only retain their higher reward status until the end of the next calendar year. After which they will return to the starter Quartz rate (1%) and must begin the process all over again. However, those who fail to make a Qualified Payment will be immediately demoted back to Quartz level and must re-qualify for the higher levels from scratch.
Earning Rewards through Zero Checking
Although Zero Checking is technically not an interest-bearing account, users can earn up to 2% cash back on their account balances, which can make it comparable to a high-yield savings account. Doing so, however, is contingent upon several factors: The cardholder being in the upper tiers of the Zero reward levels (Graphite, Magnesium, or Carbon), having an account in Good Standing, making Qualified Payments, as well as the average monthly balance of the checking account—formally referred to as the Average Current Position.
Qualified Paymentsare those that are equal or greater than the New Balance on your credit card statement and made on or before the payment due date. Minimum payments will keep your account in Good Standing, but they will not count as qualified payments. Additionally, any credit card balance paid from a source that isn’t a Zero Checking account (a check from another checking account) will not count, either. Failing to make a Qualified Payment will automatically make the cardholder ineligible to earn anything from their Zero Checking account.
Redeeming Zerocard Cash Back Rewards
Zerocard cash back earnings can only be redeemed as a statement credit towards a Zerocard account. Unfortunately, even this limited redemption method has several significant restrictions. Earnings may not be applied towards any payment requirements on the Zerocard (such as the minimum payment) nor can they be deposited as cash into a Zero Checking account. Although earnings do expire, Zero makes it relatively easy to redeem them through the Zero app. Even better is that there are no minimum redemption amounts before applying rewards as a statement credit, which significantly reduces the likelihood of any earnings being wasted.
Should You Apply for Zerocard?
A novel idea that’s sure to attract credit-shy Millennials, the idea behind the Zerocard is simple and the execution of which is elegantly done. Since cash back can be earned on all types of purchases and doesn’t rely on bonus categories, the card would be easy to use by all, regardless of lifestyle or shopping habit.
However, the card has plenty of quirks—not all of which are positive—which significantly affects the card’s appeal to the majority of consumers. The main deterrent to owning this card is how much work is required of the cardholder to earn a higher status (and thus, higher reward rates), a drawback that isn’t aided by the temporary nature of that status.
While referral-based credit card rewards aren’t anything new, the concept of having to recruit friends every two years isn’t appealing, especially considering there are plenty of cash back cards that offer 1.5%-2% cash back without jumping through any hoops and do so permanently. But referrals aside, the rewards for both the Zero Checking and Zerocard accounts are finicky, difficult to earn and most of all, short-lived. What good is earning 3% cash back if you’re required to pay your balance in full each month or risk being demoted back to square one? Unless you have the considerable spending power to meet the higher reward levels through the minimum spend amounts, you’ll probably run out of people to refer at some point, making this card’s reward structure an unsustainable one.
Overall, the Zerocard has potential as a rewards credit card, but it’s more work than it’s worth. Instead, Zerocard should be considered a beginner-friendly credit card option (even though it’s recommended that applicants have some sort of previous credit history) designed to wean the credit-averse off non-credit building debit card purchases. Applicants should be prepared to pay their balance in full every month by the due date and worry about referrals second.