5 Things to Know About the Grow Credit Mastercard

A handful of "alternative" credit cards — generally products from startup financial technology companies ("fintechs") — are exploring different ways of evaluating creditworthiness beyond traditional FICO scores and credit history. Among such products, the Grow Credit Mastercard stands out.

Offered by the Grow Credit startup and issued by Sutton Bank, the card allows customers to choose a membership plan that helps them build credit through qualifying subscriptions or bill payments. This is not an option found on typical credit cards.

Other noteworthy features include:

• No security deposit for most membership plans.

• No interest charges.

• No credit check.

Given its unique structure, the card does have some limitations that may not be a match for everyone. For instance, you won't be able to carry a balance, and your spending power will be low and restricted.

Plus, no matter which membership tier you choose, you'll owe a monthly fee.

Here’s are five things to know about the Grow Credit Mastercard.

» MORE: See the best credit cards with no credit check

1. There's no hard credit check, but you must link a bank account

There will be a "soft" credit check for identification purposes, which won't affect your credit scores. But instead of relying on a hard inquiry on your credit reports — which is common among most credit card companies when they evaluate applications — Grow Credit has its own proprietary technology that can look at income to determine creditworthiness, according to Joe Bayen, CEO and founder of Grow Credit.

One way the company does this is by requiring access to your bank account information through Plaid, a third-party service.

The lack of a credit check makes the card ideal for those with no credit or poor credit (FICO scores of 629 or below) who want to establish a credit history without the risk of taking on debt.

2. You can build credit by paying monthly bills — but the card itself charges one, too

Payment for subscription services isn’t generally factored into your credit reports, but here's how the Grow Credit Mastercard makes it work:

It offers a traditional line of credit that allows you to establish credit as you pay for qualifying monthly subscriptions that include eligible bills, TV, music and other streaming services. You pay off the bill in full each month and build credit in the process.

The virtual card is tied to one of several membership plans that include secured and non-secured options, depending on your eligibility. These plans allow you to build credit with qualifying subscriptions, each with a different limit. The pricing of membership plans may vary with different promotions. The company will let you know which plans you’re eligible for, and you can make the final selection, but the membership tiers are as follows for the non-secured plans:

• "Build" membership (free for the first 12 months): This plan offers a $17 monthly spending limit on subscriptions like Netflix, Hulu, Spotify and Pandora, to name a few. After 12 months, you'll pay $3.99 per month for this plan.

• "Grow" membership ($6.99 per month): The Grow membership offers a $50 monthly spending limit and access to “premium” subscriptions that include payments at Verizon Wireless, AT&T, Sprint, T-Mobile and Coursera.

• "Accelerate" membership ($12.99 per month): This plan offers a $150 monthly spending limit toward these same premium subscriptions.

For the secured plans, the monthly cost can vary slightly and you'll be required to put down a deposit amount. You can get the deposit back after 12 months of on-time payments or after closing the account.

The extensive list of eligible subscriptions includes AT&T, Amazon Prime, Hulu, Netflix, Disney+, HBO Max, T Mobile, Spotify, among others.

Among these plans, the "Build" plan is the best option if you qualify. Otherwise, you’re paying an annual cost of about $84 for the Grow membership plan and nearly $156 for the Accelerate membership plan. (Prices may vary with different promotions.) In that case, you’re better off saving up to pay the security deposit on a secured credit card elsewhere because you can get that money back after you close the card if you maintain a good payment history.

3. It has a low spending limit and other restrictions

The monthly spending limit on the Grow Credit Mastercard can only be used to pay for subscriptions included in your membership plan.

The monthly spending limit is different for each membership plan, but it’s only a fraction of the card’s credit limit. For instance, with the free membership plan, you can only spend up to $17 per month, but your limit on the card is $204.

A $17 limit might be enough to cover (maybe) one subscription. To get a higher limit, you'll have to pay for a higher membership tier with Grow Credit.

» MORE: How to get credit when you have none

4. You can’t carry a balance, so there’s no APR

With the Grow Credit Mastercard, carrying a balance from one month to another is impossible. You can only charge the eligible subscriptions to the card up to your available monthly spending limit. As a result, Grow Credit charges no interest. Grow Credit makes its money through interchange fees and the cost of the paid membership plans.

Since you’re required to pay on time and in full, you're far less likely to fall into a debt cycle with this card. Its sole purpose is to help you build credit. Note, however, that you will owe a monthly membership fee.

» MORE: 'Debt-proof' credit cards lower some barriers but raise their own

5. It reports to all three credit bureaus

Payments are reported to all three major credit bureaus — TransUnion, Equifax and Experian — which are the companies that record the information used to calculate your credit scores.

Payments are reported as a revolving line of credit. Previously, they were reported as an installment loan. A card that reports payments to all major credit bureaus is a must-have when building credit is your goal.

See how this card stacks up against the best credit card offers on NerdWallet.