This New Credit Card Targeting Gen Zs Offers No Interest and No Fees
The local fintech landscape just got a new player as Zed Philippines launched its no-interest, no-fees credit card. It features both a physical and a virtual card created through the Zed app. Currently, Zed is releasing only a limited number of cards, which can be availed through a waitlist.
What is Zed?
Zed is a Mastercard credit card that can be used just like any other credit card—globally, online, and in person.
Founded by Danielle Cojuangco Abraham and Steve Abraham, Zed has actually been in pilot phase since 2020. It was "formalized more recently as part of [their] licensing process when it became clear that both the Bangko Sentral ng Pilipinas and Zed were committed to roll out Zed in a sustainable way that guaranteed both customer success and the customer experience," according to Steve in an official AMA (Ask Me Anything) forum hosted online by Reddit on February 27.
The name "Zed" is inspired by their target demographic—the GenZs, who are just getting their first jobs, purchasing things like their first furniture and home appliance, or paying their first bills. But without enough credit history, most of them are not getting approved for credit cards with high credit limit.
"A big part of what’s so broken about the banking industry (beyond their customer experience) is the general approach to both risk and underwriting," Daniell said. "Currently, banks over index on the length of banking history, which shuts out young, promising Filipinos from accessing the most basic of credit tools (a credit card). And if you can’t get access to a basic tool like a credit card early on in your career, you can’t get access to home loans, business loans, and other tools later on in life that have the ability to help create real wealth. That’s ultimately the problem we’re looking to solve with Zed."
Zed's credit limit will be "based on your current and future income (i.e. your potential)," added Steve.
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Key Features of Zed
No Interest
"One core philosophy we have is that traditional credit cards tend to lead people into unsustainable spending habits because they roll two very different types of spending into a single balance: the big, purchases that require financing (a new TV) and everyday purchases (like groceries). You end up paying interest on both," said Danielle.
Zed is a type of credit called the charge card. This means that cardholders would not be charged interest for their purchase, since the balance does not revolve. But they do have to pay the balance in full at the end of every payment cycle (31 days); otherwise, the account will be put on hold.
Zed is going to offer a new type of installment plan that clearly separates out your financing/installment balance from your everyday spending balance,” Danielle clarified.
No Annual Fees
Zed does not charge an annual fee. So how does it make money? In terms of Zed's business model, revenues come from the interchange fee earned on each transaction. Interchange is a standard fee that all banks or card issuers (in this case, Zed as a credit card issuer) on the major networks (in this case, Mastercard) earn on each transaction.
Cardholders don't pay this interchange fee. Instead, card networks and banks or card issuers get a portion of the purchase amount, while the rest goes to the merchant. In essence, interchange fee is paid for by the merchant.
No Foreign Transaction Fees
Zed works with any merchant, locally or internationally, that accepts Mastercard. Plus, it claims to have zero foreign transaction fees.
"No foreign transaction fees is a core value proposition for us, so it's not going anywhere," said Steve when asked if this feature is just part of an introductory promo.
Unlimited Virtual Cards
Zed cardholders receive one physical card and can create virtual cards through the Zed app, but purchases for across all cards add up under the same balance. The virtual card is recommended for a safer and more secure way to do online transactions.
One way to maximize the use of a virtual card is to create a "burner" card through the Zed app. Make one purchase, then delete the card (along with the card number and CVV). The next time you need to make a big purchase, use another "burner" card.
You can also use a separate virtual card for all online subscriptions, and another virtual card for specific online merchants. This way, you can easily monitor purchases and lock the card when you want to stop a subscription or between uses.
Zed's Rewards Program and Benefits
Some of Zed cardholders' benefits include everyday deals on restaurants and travel discounts. Details of the rewards program will be rolled out later in the year.
"While traditional card issuers encourage people to spend more and more to earn rewards, around 70 percent of cardholders never redeem (value of around $360 billion unused worldwide). So we’re taking a different approach. Our program will have more curated and exclusive access to lifestyle, dining and travel rewards that are actually relevant to you. And redemption will be truly straightforward and hassle free through the app," said Danielle.
How to Apply for a Zed Credit Card
In an effort to "appropriately scale up [their] infrastructure with demand and can guarantee a stellar experience for each customer," Zed applications is currently through a waitlist system.
To register, head to the Zed Waitlist form. Fill out your details (name, e-mail, and mobile number). After filling out, you get a referral link that you can share to your friends. Every additional sign-up gets you 400 points that moves you up the waiting list.
According to Zed's website, their operations is headquartered in Manila, while the Engineering, Product, and Design departments are based in San Francisco. The venture recently raised $6 million (about P337 million) in funding, mostly from global fintech venture fund Valar.
