Deepak Rao, who founded his first startup in 2011, put all his business expenses on two personal credit card accounts with a combined credit limit around $3,000. He claims that they were always maxed out. My credit score has not improved since then.
Rao's second startup is attempting to address this problem. The new credit card, X1, is for those who desire premium perks with or without high credit scores. The card uses a unique underwriting process that links to a user's bank account to determine credit limits. Credit limits are determined based on cash flows. The card offers credit limits up to five times greater than average cards.
It is made from stainless steel. The card makes a pleasant clang when dropped. However, it can be used digitally like an Apple Card. The app allows users to create disposable virtual cards and cancel subscriptions in one click. Anonymous transactions can also be made without revealing a card number or real name. The points can be redeemed at a number of merchants that are frequented by tech-savvy bros like Peloton and Allbirds.
The startup claims that the X1 is a Silicon Valley favorite because of its waiting list of over 350,000 people. Affirm CEO Max Levchin and Box CEO Aaron Levie are its investors, as well as Yelp CEO Jeremy Stoppelman. It is Silicon Valley's answer to American Express. But that is just my opinion, according to David Sacks (a venture capitalist and PayPal alum who sits on X1s board, and who uses the card.
Others have also created credit card startups to fill the gaps in this market. Brex, valued at almost $8 billion, has created a card that works for startups with no revenue but funding. Karat also did the same for creators who were denied traditional financing. Both cards addressed a credit issue unique to a new type of business and provided perks that were tailored to their specific needs. The X1 hopes to do the exact same thing for consumers, especially those who are young, well-educated, and live on their smartphones.
After six months of beta testing, the X1 will start rolling out cards to its waiting lists this week. Akhil Bhandaru was one of the beta testers for the X1. He told me that he spread his expenses across several credit cards in order to reduce his credit utilization. His credit history was so poor that his best credit card only allowed him a $4,500 monthly limit, despite being an Amazon engineer. He graduated college in 2020. He was able to get six times more credit with the X1 and enjoy better perks than his other entry-level cards. He was able to use his credit card points to purchase flights back home to visit his parents for the first time.
