Credit Sesame expands into digital banking
With numerous banks, credit card issuers and personal finance sites allowing consumers to check their credit scores for free, these three-digit ratings are no longer as elusive as when the credit education site Credit Sesame launched eight years ago.
But with its new digital bank account, Sesame Cash, the company is hoping it can do something other banks cannot: use its wealth of knowledge about credit scoring to foster healthy credit behaviors and good cash management for its customers.
Founder and CEO Adrian Nazari said 84% of Credit Sesame’s approximately 15 million registered members live paycheck to paycheck and rely on the funds they have on hand to make financial decisions.
“Credit wellness goes a long way towards financial wellness,” said Nazari. “Making smarter decisions frees up more cash and improves credit. It’s a one-two punch to improve overall financial health.”
Sesame Cash, which launches Tuesday in the app for existing customers of Credit Sesame and will roll out to the public at a later date, shares many features with challenger bank offerings, including a debit card, no minimum balances or monthly fees, no overdraft fees and early access to paycheck funds.
But it tops off the account with credit-related features that Nazari believes will help it stand out.
To start, the banking service will analyze a consumer’s cash and repayment ability against their credit and recommend lower-cost credit cards and loans. It will also prequalify customers for approval.
In the coming months, a smart bill pay service will provide additional pieces of advice, such as whether customers can allocate spare funds more efficiently to pay down debt, and an auto-savings tool that will round up debit card purchases to the nearest dollar.
Unlike many digital banks, the account does not pay interest. But Sesame Cash customers earn modest rewards by improving their credit scores: $5 if their VantageScore credit scores jump by 10 points in a month or $100 if their scores spike by 100 points in the same timeframe.
Although it is technically possible for a credit score to rise by 100 points in a month, this is not common, according to VantageScore. Credit Sesame says that in 2019, approximately 19,000 to 20,000 members saw their score increase by 100 points in a month.
By combining credit education with banking services, Nazari said Sesame Cash will optimize both in a way competing services do not.
“We are giving consumers the best of challenger banks,” said Nazari. “Challenger banks have taken basic banking that traditional banks do and made it free and accessible. But this just helps customers manage their money without paying fees. We are offering all of that, but our credit-centric banking helps their cash work for their credit."