Fintech firm Empower Finance has announced the acquisition of Petal, a credit card issuer known for providing cards tailored to people with less-than-perfect credit. 

Standing by "Welcome to credit, no experience necessary," Petal initially gained attention for its promise of easy access to credit without the need for a security deposit and the possibility of earning cash back. However, Petal received criticism last year when some cardholders were downgraded to card versions with annual fees.

Empower Finance specializes in cash advances via its app. These advances have no traditional interest or late fees but require a monthly subscription fee of $8. Empower sets borrowing limits based on users' income and spending habits, providing up to $250 without needing a credit check.

What Empower's Acquisition of Petal Means for Cardholders

Empower's acquisition of Petal aims to combine the two companies' strengths, potentially providing Petal cardholders with access to Empower's suite of financial products and tools. However, this may come with a subscription fee for Empower's services.

While Empower's cash advances have potential benefits, borrowers who require longer repayment periods may be drawn to Empower's credit product, Thrive, which carries interest charges. Despite past issues, Petal is known for its innovative credit evaluation technology, which aligns with Empower's approach of using alternative data rather than credit scores.

The acquisition comes nearly a year after Petal received criticism for downgrading some customers to cards with annual fees despite its initial promise of low-cost credit building. Cardholders were given the option of accepting the new terms or canceling their cards, which could impact their credit scores.

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What Petal Cardholders Should Expect

For current Petal cardholders, immediate changes may not be apparent, but the acquisition could lead to improvements or alterations in the company's offerings, CNET said.

Meanwhile, cardholders can wait and observe developments or explore alternative credit card options. Secured credit cards are recommended for those considering alternatives to their Petal cards, particularly for individuals with fair or poor credit. 

Examples include the Capital One Platinum Secured Credit Card and the Discover it® Secured Credit Card, which offer opportunities to build credit without annual fees. 

Individuals with responsible credit card usage history may also qualify for unsecured cards with no annual fees through their banks or credit unions.

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