How Does the Chime Credit Builder Work? [Our Essential Guide]

Yes, it's true. Chime's Credit Builder can indeed help you boost your credit score by 30 points. According to a study by Experian®, customers who started using the Credit Builder between June and October 2020 saw their average FICO® Score 8 go up by 30 points after about 8 months. Better yet, there are no annual fees. Pretty sweet, right?

Just remember that paying on time can boost your score, but if you're late, it might drag it down. As we will explore, Chime has an AutoPay feature to make sure you always pay before the due date.

In this article, we'll also delve into the details of how the Chime Credit Builder works, how to use it, and how your results may vary based on factors like payment history, the length of your credit history, and your "credit mix".

What Is the Chime Credit Builder?

The Chime Credit Builder is an optional account that you can apply for within the Chime app once you sign up and open the checking account. Chime will send you the Chime Secured Credit Builder Visa® Credit Card in the mail, which you can spend the funds in the Credit Builder account.

Unlike traditional unsecured credit cards, the Chime Credit Builder requires you to deposit funds into the separate account. This serves as collateral for your credit limit. While it's a real Visa credit card, you can only spend what you've deposited into the Credit Builder account. This helps you avoid taking on unsecured debt and incurring interest fees.

What's the Difference Between This and a Debit Card?

The main difference is that your spending and payment history with the credit card will be reported to credit bureaus, which can affect your credit score.

Another important point to keep in mind is fraud protection. While debit cards do have fraud protection technology, credit card fraud protection is generally stronger because fraudulent charges don't hit your account directly while they're being investigated. Debit card fraud, on the other hand, can be harder to prevent because debit cards are directly linked to your account.

How Does the Chime Credit Builder Work?

Even though the Chime Credit Builder card is a legit credit card, it will not extend an unsecured credit line of $20,000+ to you like other credit cards. Instead, you credit line will be as large as the amount that you contribute to the Credit Builder account. You need to start with a $200 direct deposit, but after that, you can transfer in as little as $1.00 to keep using the card.

It is thanks to this system that no hard credit check is required to apply, making it an accessible option for individuals with limited or poor credit history.

Another good point to remember is that you'll have full access to the reserve funds at any time to spend. Chime does not hold that money from you like some kind of refundable security deposit.

Building Credit History with the Chime Credit Builder

Chime reports your credit usage and payment history to the three major credit bureaus: Experian®, Equifax®, and TransUnion® to help you establish or rebuild your credit history. Even though it is a secured credit card, you can still technically make late payments if you forget to pay on the payment date. It's best to just keep on the optional AutoPay feature to automatically pay your balance in full each month.

Additionally, the Chime Credit Builder is able to recognize recurring payments you make, such as phone bills or subscriptions. Adding these kinds of payments to the Chime Credit Builder card is a good idea because they can demonstrate your ability to responsibly meet financial obligations consistently. Plus, the longer you use the card, the longer your positive credit history becomes, potentially improving your credit score over time.

"Credit Utilization"

Credit utilization refers to the percentage of your available credit that you're currently using. For example, if you have a credit card with a $5,000 limit and you've charged $500 to it, your credit utilization rate would be 10%.

In the case of the Chime Credit Builder card, your credit limit is directly capped at the amount you deposit into the account. Because you set the limit with your own money, Chime doesn't report credit utilization to the credit bureaus.

"Credit Mix"

Credit mix refers to the variety of credit accounts you have, such as credit cards, loans, and mortgages. Having a diverse credit mix can positively impact your credit score as long as you manage the different types of credit responsibly.

The Chime Credit Builder card can contribute to diversifying your credit mix, which may help improve your credit score. While it's not guaranteed to boost your score, having a mix of credit accounts, can be beneficial in the long run. Be careful not to open too many credit lines though (especially within a short period of time) because applying for and opening credit cards can lower your score.

How To Use the Chime Credit Builder Card

First things first. To get the Chime Credit Builder card, you'll need to apply in the app and meet the following requirements:

• Have a checking account with Chime;
• Make a qualifying direct deposit of $200 or more.

Once approved, Chime will send you a physical credit card in the mail, and you'll also have access to a virtual card to put into your digital wallet. You can use the card for everyday purchases like gas, groceries, bills, and subscriptions, all of which contribute to your credit history.

Fund Your Credit Builder Account

You can move money to your Credit Builder account from your Chime checking account, optional Chime savings account, or linked bank account. Transfers from your Chime account should be instant, but from external banks, they might take 1-3 business days.

Then, use your Chime Credit Builder card to start spending those funds.

Safer Credit Building

The AutoPay feature is optional, but Chime will strongly suggest you to turn it on in the app. You can switch it off if you prefer, but it's a risk with essentially no reward. Keep it on to make sure you always pay your credit statement automatically in full and on time.

Payment Date

You have the option to pay off your credit line with your Credit Builder balance either 1 day before the monthly statement or 10 days before. If your account is (somehow) short on funds during the date of the payment, Chime will make the largest partial payment possible, but you'll need to cover the rest. Make sure to pay on time to avoid penalties.

Does the Chime Credit Card Have Fees?

The Chime Credit Builder doesn't have any of the typical fees associated with standard credit cards. There's no annual fee, no interest to worry about, and no fees on cash advances from ATMs. This makes it an affordable and straightforward option for building your credit without getting hit with extra charges and penalties.

No Annual Fee

Many traditional credit cards charge annual fees. They often come with perks and benefits, like miles, airport lounges, travel insurance, discounts, cash back, and more. These fees can range from a few dollars to $500+ per year, depending on the card. Chime does not charge an annual fee for its credit card.

No Interest

Additionally, most credit cards charge an Annual Percentage Rate (APR) on any balances you don't pay back in full. In other words, you'll pay some interest fees on debt that you take on. You'll pay no interest with Chime.

No Cash Advance Fees

Another cost to watch out for with most credit cards is the fee for ATM withdrawals, also known as cash advances. Credit card companies see cash advances as liabilities because they're giving you cash directly, instead of a credit line for purchases. Because of this, they often charge high fees ($10+ per withdrawal) and higher-than-average interest rates on cash advances.

What's great about Chime is that you can withdraw cash from ATMs with the Credit Builder card without incurring cash advance fees or interest. Just make sure to use the in-app map of their fee-free ATM network to avoid third-party withdrawal fees.

The Chime Credit Builder In Summary

The Chime Credit Builder card is one of the top choice in the US for improving your credit (especially with today's very high interest rates). You can transparently track your credit score and build your credit history, setting yourself up for a better financial future.

Chime's Credit Builder doesn't require credit checks to apply and it doesn't have annual fees. Opening, funding, and spending with the Credit Builder Account on the Chime app is seamless as well. For these reasons and more, we recommend Chime as one of the best credit builder cards in the country.

Learn more: Read our in-depth 2024 review of Chime.