Md. startup lets users treat credit cards like debit cards

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A Maryland fintech startup wants to make it easier for people to get the most out of their credit cards without racking up debt.

Through a smartphone app, Debx lets consumers use their credit card like a debit card while taking advantages of a credit card’s rewards program.

“I like to say I’m in the endorphin drip business,” Ben Psillas, Debx’s founder, said. “Going back to the core root of why we did this, I loved my debit card because it paid off that transaction that day.”

With Debx, Psillas hopes to give consumers the best of both credit and debit while avoiding their negative points.

Debit card users only pay for what they have money for, but not using a credit card means they cannot build their credit, take advantage of rewards programs and often go without fraud protection.

Credit card users tend to put off paying for recent purchases until they get a billing statement and can end up paying interest on their purchases as well.

Psillas thinks credit card companies will love the way his app encourages users to swipe their credit card more often.

“For them this is actually great,” he said. “Now you’re using credit for more. (Credit cards get a) larger share of wallet.”

Debx could also be a way for credit card companies to gain greater traction in the wallets of younger people.

Polls and studies have shown that young people and millennials tend not to use a credit card as much because they are wary of falling too far into debt. They already have student loans and do not want to compound their debt problem.

Less than a third of millennials have a credit card, a 2016 Bankrate survey found.

The Debx app connects a consumer’s credit card to their bank account. It then pays for a credit card purchase the same day.

But a user can also set rules for the account, including not to pay when the bank account falls below a certain amount or for large purchases.

“Those rules are really the primary driver here of what gets the best of credit and debit,” Psillas said.

But while the combination of credit and debit could help consumers, Debx does not make money on that transaction. Instead, the company hopes to make money by selling targeted ads to consumers.

These ads would suggest credit cards with rewards programs that are beneficial to a consumer’s spending patterns.

If a user buys a lot of plane tickets or a different credit card would generate more rewards points, the app would suggest switching to that card.

“The way we make money is through intelligent recommendations,” Psillas said. “By building up that trust factor with the customer … if they’re making a recommendation that my card is better for me and I should have it in my wallet based on my history.”

Psillas started the company in January last year, and the app launched for the iPhone last month. An Android app is in the works.

Psillas and his chief technology officer, Purvesh Patel, came from another fintech company Psillas founded. Allpoint was also founded out of Psillas’ frustration with the cards in his wallet, this time ATM fees.

That company grew to more than 60 million cardholders who could withdraw money at a network of surcharge-free machines.