Online lender SoFi recently announced it’s getting into the credit card business. We don’t yet know what the card will offer in terms of rewards, but here are my predictions based on SoFi’s reputation and its other offerings.
The online lender also plans to add cash back rewards to the Sofi Money debit card along with complimentary cell phone insurance, discounted airport concierge services and other perks. Adding these incentives to the debit card makes me even more excited about the potential credit card benefits.
Debit card rewards mostly vanished after debit card interchange fees were capped in 2010. And when they still exist, they tend to be much less generous than credit card rewards. For example, Discover offers 1% cash back on up to $3,000 in debit card purchases each month, which is quite good among debit cards but would be unimpressive for a credit card.
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SoFi’s track record bodes well for its foray into credit cards
We don’t know what SoFi’s debit or credit rewards structures will be, but I’m optimistic. I reached out to SoFi and a company representative told me she was unable to provide any additional details beyond the news release at this point. Here’s what we do know:
- The SoFi Money cash management account earns a competitive 1.60% APY without any account fees, and it even reimburses out-of-network ATM charges.
- The company has built a solid reputation, first in student loan refinancing and later in other categories such as personal loans, mortgages, investing, saving and spending. It claims to have refinanced $18 billion in student loans for more than 300,000 members, and SoFi says 98% of them would recommend SoFi to a friend.
- SoFi also made waves when it signed a 20-year, $600 million deal to put its name on the new Los Angeles stadium that will open in July. SoFi Stadium will play host to the NFL’s Chargers and Rams, Super Bowl LVI (in February 2022) and popular concerts (Taylor Swift, Kenny Chesney and Guns N’ Roses have already announced dates).
“Members holding certain SoFi and Mastercard products will be able to take advantage of an enriched fan experience at SoFi Stadium,” proclaimed the recent news release.
We don’t know those details yet, either, but here are some comparisons from other bank-branded entertainment venues.
My predictions for the SoFi credit card
Here are some educated guesses about what the SoFi credit card might include:
If we assume the debit card will offer something like Discover’s 1% cash back payout, I could see the SoFi credit card giving 1.5% or even 2% cash back across the board. PayPal, another fintech company, has a credit card (the PayPal Cash Back Mastercard) with 2% rewards on all purchases.
Another investment firm, Fidelity, has the Fidelity Rewards Visa Signature card, which rewards cardholders with 2% back on all purchases as long as they redeem into a Fidelity account.
Another guide might be the credit cards issued by student lender Sallie Mae. The Sallie Mae Accelerate card grants 1.25% cash back on all purchases, and that goes up to 1.5% if cardholders use the cash back to pay down their student loans. The Sallie Mae Evolve card, meanwhile, gives 1.5% cash back on cardholders’ top two purchase categories each month and 1.25% on everything else.
SoFi could take elements from either or both of these. It also seems like SoFi will follow Sallie Mae’s lead by offering cell phone insurance (in Sallie Mae’s case, this covers up to $600 in damages per claim with a maximum of $1,000 per year).
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SoFi’s target cardholder likely skews younger, and can probably be summed up as a 20-something urban professional. That’s not their only use-case, but given their history in student loans and their branding as “Social Finance, Inc.,” SoFi is much more hipster than boomer.
Young adults, as a rule, love travel, dining and other experiences. That could fit well with the foreshadowed SoFi Stadium perks (perhaps priority access and discounts on tickets, food and drinks).
The SoFi credit card will probably be more of a starter card than a premium card, but I think it could have a lot to offer young adults. One thing that might be missing is a sign-up bonus. None of the aforementioned Sallie Mae, PayPal or Fidelity cards offer one, and I’m not expecting one from SoFi, either.
This feels like it will be more of a long-term play to acquire young customers and grow with them (potentially cross-selling other banking and loan products as appropriate). Many card issuers have grown wary of welcome bonuses because they can be gamed by the card-churning crowd, and I don’t think that’s SoFi’s target audience anyway.
Between SoFi and Venmo (which is also planning to unveil a credit card soon), we have two interesting fintech credit card offerings on tap.