Company offers cards designed for credit challenged
Essentia Financial, which opened about 16 months ago, has launched a new in-store, short-term charge card currently distributed to more than 200 grocery stores, convenience stores, and retail locations in Texas, Tennessee, Indiana, Ohio, South Carolina and Mississippi.
The card, with a maximum credit limit at $150, is meant for shoppers who have credit trouble, who need to buy essential items such as groceries or fuel, but whose income may be stretched thin between paychecks. The card is also set up to reward customers who pay back loans by improving their credit scores.
The inspiration for the card came from old-fashioned store charge accounts, said Dan Brandon, Essentia’s director of business development.
“Years ago you could go to a local grocery store, sign for something and come back and pay for it later,” Brandon said. “Over time that went away. What we have done is we’ve taken that concept and updated it for the new millennium. The cards are designed for the population in the U.S. with limited access to credit, and those who need help from time to time.”
Brandon added that Essentia has seen a strong positive response to the new cards, with anywhere between 250 and 300 cards being issued every month. Also, 1,500 cards are used each month, he said, and more than 4,000 cards have been issued since the program launched.
Essentia began distributing the credit cards to small, regional grocery and convenience store chains across a few states, and is hoping to move into more states and big box retailers, pharmacies and larger grocery stores in the future.
The first deal local to the Fort Worth-Dallas area Essentia stuck was with Carrollton-based Elrod’s Cost Plus Supermarkets, which has locations on North Main Street and north west 25th Street in Fort Worth.
Essentia CEO Tommy Glenn said the cards give retailers a competitive advantage.
“Every time we issue a card, what [retailers] are seeing is an increase in sales,” he said. “And, every time we issue a card we can expect it to be used between 12 to 17 times a year, that’s about how often people on average get in a situation where they need to use the card. So, the average amount charged in convenience stores is about $20, and a convenience store chain can look at that and see that most of those 12 to 17 shopping events are incremental sales they wouldn’t get otherwise.”
Also, Brandon added, the card takes away any pressure customers who find themselves in difficult financial situations may experience to write bad checks for essentials to make ends meet, which hurts both the customer and retailer.
“It also creates a lot of loyalty on the customer side because [the store] has done something to extend some credit to them and they’re likely to come back,” he said.
Applying for the card is a simple process, Brandon said, which doesn’t include credit score considerations. A customer picks up an application from a store or a store employee, and calls a 24-hour Essentia call center. The customer will be asked to provide profile information, such as a name and address, bank information, as well as two days per month to allot for the loan repayment to be debited from an account. The customer then gives a store employee a voided check for account verification, and the customer is approved.
The initial credit limit is $50, Glenn said, and each time a customer pays back their loan the limit is raised an additional $25 up to a $150 limit. Also, each time a customer pays back a loan, Essentia reports the payment to improve customer credit scores, Glenn said.
“One of the things that’s important to us is to improve the credit worthiness of our cardholders, and to that end, when customers make a payment, when they pay off that $50, we report that as a payment for their credit score,” Glenn said. “Most cards and most other credit companies do not report the positive payments, they just report the negative, so over time they build up a credit score themselves and that affects everything for them. If they want to apply for anything, or even qualify to rent a place, they couldn’t do that otherwise.”
In the future, Essentia plans to extend their credit cards into as many retailers as possible, Brandon said.
“Then, we will probably find ourselves looking for a product for people who have had this card to evolve into,” he said. “For now, though, our focus is getting this to 20,000 to 30,000 card holders.”
