Startup lender Petal launches its subprime credit card

The credit card startup Petal, which is targeting U.S. consumers with no credit history as well as folks with blemishes on their borrowing records, is going national.

The broad release of the Petal Visa card, announced Tuesday, comes more than a year after the New York company began testing its product.

The firm said that it has a waiting list of more than 100,000 consumers and plans to use $34 million in new financing, most of it from the investment bank Jefferies, to fund the expected surge in card balances.

Petal is the latest startup to dive into the subprime credit card market, which has experienced a resurgence after cratering in the wake of the 2008 financial meltdown. The Build card from FS Card Inc., the Arrow card from LendUp and the Ollo card from Fair Square Financial are all competing for customers who do not qualify for mainstream offers.

Petal sees an opportunity to lend to consumers who have never borrowed, as well as to those whose credit histories are limited, and whose low credit scores may exaggerate the risk of lending to them.

Rather than relying on credit scores, the venture-backed startup links into its customers’ bank accounts and analyzes their monthly cash flow, which it then uses to gauge their ability to manage debt. “And that’s data that your traditional credit card issuer isn’t looking at,” Petal CEO Jason Gross said in a recent interview.

Petal is positioning itself as a white hat lender in a segment of the card market that traditionally has relied heavily on fee income. The company does not charge late fees — or any other fees. Of course, borrowers who fail to pay on time do incur interest charges.

“We think of it as a credit card that’s a little bit less greedy,” Gross said. “Our belief is that if customers succeed, we will as well.”

Petal’s website is currently advertising annual percentage rates between 14.49% and 26.49%, depending on the company’s determination about the chances that the borrower will repay. As of last week, the average interest rate on cards for consumers with bad credit was 24.18%, according to CreditCards.com.

The Petal card, issued by WebBank in Salt Lake City, comes with a mobile app that allows customers to schedule payments, and also shows users how much it will cost them to carry a balance each month.

The startup lender has the backing of Valar Ventures, a firm co-founded by the billionaire investor Peter Thiel. Valar led Petal’s $13 million Series A funding round, which was announced in January.

“I think that simple proposition of being fair and transparent is really compelling, and will be enough for them to build a really big business,” Valar co-founder James Fitzgerald said in an interview Monday.