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Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?

notmyrealname23
Established Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?


@Aim_High wrote:

@notmyrealname23 wrote:


Well, Mint also stores your credentials for financial institutions (aka Intuit). Same with Personal Capital. Same with roboadvisors Betterment and Wealthfront when they're tracking net worth. I believe a lot of these companies are using Plaid. Lot of red flags there.

... I wouldn't blame people for not wanting to go this route at all for privacy concerns, but I pretty sure there are millions of people who've already jumped off this bridge. Smiley Happy


True, this isn't a unique business model in general and I'm aware of how data is compromised with other services.  However, just because it's becoming more commonplace and "everyone is doing it" doesn't make it a good decision. 

 

I looked into both Mint and Personal Capital many years ago and even started setting up accounts before I realized the privacy I would be giving up.   As an older consumer, I am concerned at how trustingly our younger adults are to giving Big Tech access to their private data.  It also concerns me that often, there apparently isn't even a consideration given to the privacy compromises these new tech-savvy companies ask their consumers to make.  Privacy policies aren't easy to read and even when you do (as I pointed out above), the language errs in favor of the company's lawyers who wrote them. 

 

I just believe people need to make an informed and careful decision before they agree to the terms such as these.  There are other choices.  Buyer beware. 


I get you and the "I don't want to give up my privacy" angle. That's a very valid reason to reject products.

OTOH Wells Fargo has been around since forever in relative terms and they did something way, way worse than marketing your personal data... plus if you're part of the Equifax data breach... the baddies already have your SSN and ALL KINDS of privacy concerning things. 

I don't think you can trust financial institutions just because they've been around, and just because a company is new and using some new techniques to evaluate credit risk they must by default be bad. My guess is that a 1.5% cashback credit card is sustainable based on interchange because everyone and their cousin has one of these (this isn't like a 3% AOD card)- including Capital One and Discover too, who tend to go for riskier underwriting. If a company is mostly virtual, their overhead is less than a traditional bank.

But your points are good to keep in mind. Smiley Happy

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Message 21 of 85
notmyrealname23
Established Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?


@Citylights18 wrote:

@Biscuits wrote:

Hello! I recently just turned 18 and am new to the whole credit card world. I don't have a credit score yet which makes it really difficult to get any card. I was told by a friend about a new credit card company called Tomo which doesn't require credit history. Anyone else have experience with them? I appreciate any insights or feedback you can share.  Also if you have any other suggestions I am open to those as well. Thank you!


What about finding a bank with a cashback debit card? That would get you into the cashback game and since your bank sounds limited you might want to consider putting your money somewhere else.

 

Another idea. Paypal is a 2% cashback card that I bet would be open to just about any applicant.


Someone's suggesting a debit card... that's someone's cue to explain why not. Smiley Wink

I was using a PayPal Business Debit Mastercard for years while I was locked out of the credit card market during an ongoing bankruptcy plan. 1% is better than 0% Smiley Happy and since I didn't usually keep a balance in the account (it was set up to auto-debit my primary checking) and it emailed me after use, even if it got skimmed or involved in fraud, I would know there was fraud BEFORE the PayPal debit hit my checking, and I could call up PayPal and fix it on the spot. It also has rental car CDW insurance (and I knew which companies would allow debit card rentals, and that only put holds on the amount of the rental), which was also handy to have during bankruptcy when credit cards weren't giving me the time of day.

It's not a terrible idea to use a cashback debit card if it suits your needs (other than the usual "this is why debit cards are terrible ideas" speech we know is coming- that they are linked to a checking account that can get drained, etc).

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Message 22 of 85
Biscuits
New Member

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?

I agree I really don't want a secured card. I don't have much money to start with anyway so the deposit would be difficult. 

Message 23 of 85
Biscuits
New Member

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?

Ooo PayPal seems like a viable option. I'll look into it. 

In regards to the debit option, do you or anyone have any recommendations if I went that route? 

Message 24 of 85
James_A
Senior Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?


@MaizeandBlue wrote:

 ... this thread is beginning to look like a cleverly disguised promotion for a new card.

Or not so cleverly.

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Message 25 of 85
Aim_High
Senior Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?


@notmyrealname23 wrote:


I get you and the "I don't want to give up my privacy" angle. That's a very valid reason to reject products.

OTOH Wells Fargo has been around since forever in relative terms and they did something way, way worse than marketing your personal data... plus if you're part of the Equifax data breach... the baddies already have your SSN and ALL KINDS of privacy concerning things. 

I don't think you can trust financial institutions just because they've been around, and just because a company is new and using some new techniques to evaluate credit risk they must by default be bad. My guess is that a 1.5% cashback credit card is sustainable based on interchange because everyone and their cousin has one of these (this isn't like a 3% AOD card)- including Capital One and Discover too, who tend to go for riskier underwriting. If a company is mostly virtual, their overhead is less than a traditional bank.

But your points are good to keep in mind. Smiley Happy


You are correct.  The information age we live in makes violations of our private data an increased threat, not only from newcomers but also the established players who can also misuse or carelessly handle our personal details.  

 

I wasn't trying to imply that Tomo was "bad," per se.  Reading the article I linked in American Banker, it appears the business was formed to fill a legitimate need, especially since it was founded by immigrants and aimed at helping immigrants break into the credit world in the US.  At the same time, however, when there's a lot going on with personal data that has to do with funding a business model and that business is not more upfront and direct about how they profit from it in their advertising, that raises big concerns for me.   

 

The 1.5% cashback credit cards have not been sustainable in the overall industry due to interchange fees alone.  They have been sustainable because they are also supplemented by a combination of other fees, interest charges, or redemption restrictions that decrease the actual payouts.   Banks offering these cards have also used them to sell customers other financial products where they make money.   Even for a 'virtual' institution like Tomo with lower overhead costs, the idea that interchange fees alone is enough to sustain their business is simply implausible IMO. 

 



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Message 26 of 85
notmyrealname23
Established Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?


@Aim_High wrote:

The 1.5% cashback credit cards have not been sustainable in the overall industry due to interchange fees alone.  They have been sustainable because they are also supplemented by a combination of other fees, interest charges, or redemption restrictions that decrease the actual payouts.   Banks offering these cards have also used them to sell customers other financial products where they make money.   Even for a 'virtual' institution like Tomo with lower overhead costs, the idea that interchange fees alone is enough to sustain their business is simply implausible IMO. 

 


https://www.hostmerchantservices.com/current-us-interchange-rates/

All I can say is my Petal VISA is at 1.5% CB (you start at 1%, then go to 1.25%, then 1.5% based on 6 month periods of on time payment) and seems to be doing just fine (it really is no fee, the app is pretty slick).

The company Petal partners with is WebBank. WebBank has other partners as well...

 

https://www.webbank.com/our-brand-partners/fingerhut
https://www.webbank.com/our-brand-partners/oportun

https://www.webbank.com/our-brand-partners/avant

https://www.webbank.com/our-brand-partners/dell-financial-services

 

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Message 27 of 85
Throckmorton
Regular Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?

Tomo is a fintech. No one is investing in a fintech to earn merchant fees. Their actual business model does not appear to have been revealed. I'd wait at least until that becomes clear.

Message 28 of 85
MeN5
Regular Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?

Just in case you choose Discover we both can get 

 

MOD CUT - REFERAL LINKS ARE NOT ALLOWED 

Message 29 of 85
Aim_High
Senior Contributor

Re: Stumbled upon a new credit card called Tomo. Should I get this as my FIRST card?

@notmyrealname23 wrote:

@Aim_High wrote:

The 1.5% cashback credit cards have not been sustainable in the overall industry due to interchange fees alone.  They have been sustainable because they are also supplemented by a combination of other fees, interest charges, or redemption restrictions that decrease the actual payouts.   Banks offering these cards have also used them to sell customers other financial products where they make money.   Even for a 'virtual' institution like Tomo with lower overhead costs, the idea that interchange fees alone is enough to sustain their business is simply implausible IMO. 


All I can say is my Petal VISA is at 1.5% CB (you start at 1%, then go to 1.25%, then 1.5% based on 6 month periods of on time payment) and seems to be doing just fine (it really is no fee, the app is pretty slick).
The company Petal partners with is WebBank. WebBank has other partners as well...

Well, that was an interesting diversion to say the least!  I just spend some time chasing down the rabbit hole about Petal and there's much to be said that makes it quite a different animal.  Thank you, I learned a lot!

 

First, I'll say I'm glad it's working for you and I never said Petal was a bad product.  And I never disputed that they could afford to pay you 1% to 1.5% in cash back.  Anyway, we were talking about Tomo and their business model, and how they made their money.  Ironically, it turns out that the example you picked couldn't be any more different because not only does it not resemble Tomo, it also doesn't even faintly resemble most other lenders we would see issuing credit cards!   So Tomo and Petal are not a fair comparison, even though they share some similarities.

 

As you stated, Petal is issued in partnership with WebBank.  And as you said, WebBank also provides credit products with other partners (18 total) including Fingerhut, Dell Financial Services, PayPal, Avant, Lending Club, Prosper, and Zero Mastercard.  Since there are 18 products within their lineup, that would give them a buffer on the rewards payout and profitablity of each segment that Tomo does not have.  But the plot thickens. 

 

Unlike Tomo, Petal is an actual credit card product.  While they do not charge fees, they do allow you to pay-over-time and they do charge and collect interest at rates up to 23.99%.  (Interest fees paid by some accountholders would help subsidize reward payouts.) 

 

WebBank was founded in 1997, is certified by the FDIC, and employs 122 people.   Like other traditional banks (and unlike Tomo), WebBank has significant deposit accounts including an online savings and time deposits, both of which would help them maintain overall profitability and the ability to pay credit card rewards from sources besides interchange fees.  Per the Deposit Accounts website, they had $960 Million in assets as of Q4 2019 and they are the 839th largest bank in the US.   Their YTD Return on Assets is 5.61% and YTD Return on Equity is 32.03%. 

 

Now it gets even more interesting.  WebBank is actually one of 17 subsidiary companies owned by Steel Partners Holding, a global diversified holding company with operations in diversified industrial products, energy, defense, supply chain management and logistics, banking and youth sports.  "Steel Partners was founded in February 1990 as a private investment firm by Warren G. Lichtenstein. Since that time we have invested in the United States, and a dozen countries throughout Europe and Asia.  Today, Steel Partners has 5,300 employees at 70 locations in 11 countries around the globe. Furthermore, according to each of our holdings’ most recent year-end financial reports, the combined revenue would be in excess of $1.6 billion, with substantial profits and cash flow." 

(See:  https://www.steelpartners.com)

 

Per their 2019 Annual Report regarding only the Financial Services sector of their holdings (including WebBank), "Revenue in 2019 increased $49,435,000 or 40.5%, as compared to 2018. The increase was due to higher interest income driven by larger outstanding loan receivable balances and increased volume in lending programs, as compared to 2018." 

 

"WebBank generates revenue through a combination of interest income and non-interest income. Interest income is derived from interest and fees earned on loans and investments. Interest income is accrued on the unpaid principal balance, including amortization of premiums and accretion of discounts. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield over the estimated life of the loan. Non-interest income is primarily derived from premiums on the sale of loans, loan servicing fees, origination fees earned on certain loans and fee income on contractual lending arrangements."

 

In summary Petal Card is underwritten by a very large and well-funded web-based bank which is part of a huge multi-national corporation.  Looking at only the subsidiary WebBank, it operates in the same typical business model of traditional brick-and-mortar banks.  Meanwhile, Tomo appears to be a financial tech startup.  There's no comparison to the business models between these two. 

 

Steel_Partners_01.jpgSteel_Partners_02.jpgSteel_Partners_03.jpg



Length of Credit > 35 years; Total Credit Limits > $500K
AoOA > 28 years (Jun 1993); AoYA (Aug 2020); Gardening since 08/15/20.
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Message 30 of 85
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