Petal Contest Motivates Cardholders to Reduce Debt
It may be counterintuitive, but Petal—a new fintech player in credit cards—is literally trying to make less money on interest, encouraging cardholders to pay off debt faster with an unorthodox sweepstakes announced Thursday.
Consumers with a Petal 1 or Petal 2 card who pay more than the minimum due on their monthly bill will be automatically entered into a contest with a prize that could pay off up to $500 of their card balance. Petal is awarding 100 prizes (50 in January and 50 in February) based on a random drawing.
Given that interest quickly compounds, no one will dispute that it’s best to pay more than the minimum due each month, but credit card companies typically don’t say this too loudly since they profit from interest payments. Some banks even default to the minimum due on their mobile apps, making it harder to find and enter the full balance. Petal, by contrast, sets the payment default to “pay the balance in full.” And someone who can only pay the minimum can use a tool to see how much they’ll end up paying in interest.
“When is the last time your credit card company asked you to pay them less interest? It probably hasn’t happened, because the more money you owe, the more money they make,” Petal CEO Jason Gross said in an email. “This promotion is designed to push things in a better direction in 2021, by giving people a substantial incentive to pay more than the minimum.”
It’s worth noting that paying even 1 cent over the minimum amount due qualifies for the contest. And interestingly, cardholders can enter the sweepstakes by filling out an online survey instead, so even those strapped for cash can participate. The first contest runs until Jan. 26 and winners will be notified via email, according to the official contest terms.