Upgrade Launches Checking Accounts & Debit Cards

Fintech company Upgrade has been identifying as a neobank, though its primary focus has been on personal loans and, more recently, credit cards. Previously, it wasn’t possible to fully transition your banking activities to Upgrade. Now, Upgrade is adding two crucial components – checking accounts and debit cards – to complete its service offering.

This launch positions Upgrade as a more direct competitor to other innovative banks, like Chime and N26. Users can now establish a checking account, manage it through a mobile application, and easily send and receive funds.

These checking accounts come with no monthly fees and require no minimum balance. Cross River Bank provides the underlying FDIC-insured checking accounts.

A debit card is also included with the checking account. For ATM withdrawals, Upgrade will reimburse ATM fees for its most active users, up to five times each month. To access this benefit, customers must either maintain a specific account balance or establish regular direct payroll deposits.

Using your debit card for recurring subscriptions and everyday purchases allows you to earn 2% cash back. Qualifying purchases encompass locations like convenience stores, gas stations, restaurants, and food delivery services, while all other debit transactions earn 1% cash back.

Offering rewards on debit card spending is relatively unusual. Most financial institutions prioritize credit card rewards due to the significantly higher interchange fees associated with credit transactions. Debit cards typically generate less interchange revenue.

“Neobanks, in particular, often struggle to provide substantial (or any) rewards on debit cards because interchange fees frequently represent their primary revenue stream,” explained Upgrade CEO Renaud Laplanche in an email.

These interchange fees can become substantial with a large customer base. Reports from The Information indicate that Chime generated over $600 million in revenue last year solely from interchange fees.

The company intends to continue generating the majority of its income from credit-based products. “Our core strategy centers around monetizing our customer base through credit offerings,” Laplanche stated.

Upgrade also provides a credit card that offers 1.5% cash back on all purchases. Furthermore, if you are unable to meet your monthly balance payment, the company offers a solution to consolidate monthly charges into manageable installment plans with repayment terms ranging from 24 to 60 months. These plans feature fixed interest rates and consistent monthly payments. Upgrade customers utilizing the company’s checking account will qualify for reduced rates on Upgrade loans.

A personal loan from Upgrade is available even without a credit card or checking account. It’s possible that customers will explore Upgrade’s additional products after initially signing up for a personal loan.