Empower Finance is buying Petal, the credit card issuer that originally made a splash with the promise of helping customers build their credit inexpensively but ended up downgrading some of those same customers to cards charging numerous fees.

When it launched in 2016, Petal credit card company touted itself as an affordable way to access credit for anyone with a less-than-stellar credit history. Its approval process used alternative data like banking information instead of just credit scores and credit history. 

And unlike some credit-builder cards, Petal doesn’t charge a security deposit. Plus, you could earn 1% to 10% in cash back — depending on the card you were approved for — a rarity for a credit-builder card with no annual fee.

But the company stumbled amid financial woes with users reporting issues that included some customers being downgraded to a version of the card that charged an annual fee.

If you’re a current Petal cardholder or are interested in using one of this company’s cards to boost your credit, here’s what the acquisition could mean for you.

Who is Empower Finance?

Empower Finance is best known as a cash-advance app (it is not affiliated with Empower, which offers investment and retirement planning services). A cash advance is basically a short-term loan you can access without having to apply for a loan through a bank or online lender. Depending on where you borrow from — like a predatory lender — cash advances can charge sky-high interest rates. 

Empower doesn’t charge interest or late fees on its cash advances, but you must subscribe to its app, which costs $8 per month. Instead of your credit history, Empower says it uses your income and spending habits to determine how much you can borrow, up to $250. The amount borrowed is deducted from your bank account on your scheduled repayment date.

Empower Finance also offers other financial products and money management tools on its app, including a credit product called Thrive, as well as credit monitoring and savings and budgeting tools.

Empower plans to complete its acquisition of Petal by the end of June and is expected to integrate both companies’ offerings into one product experience, although it’s unclear how that might play out.

What does this mean for Petal cardholders?

Petal customers could potentially benefit by getting access to all of the Empower Finance products and money management tools. But it could also mean they get charged Empower’s $8-per-month subscription fee.

And while Empower’s cash advances offer potential value, if borrowers need more time to repay, they might be tempted to use the Thrive credit service instead, said Jason Steele, credit card expert and CNET expert review board member. 

“Empower advertises cash advances with no interest or fees, but if you choose your repayment date instead of the default or select a split payment option, then you’ll incur interest at an annual percentage rate of 35.99%,” he said. “This isn’t as predatory as some payday loans, but it’s higher than many credit cards.” 

Despite users’ dissatisfaction with Petal’s downgrading practices, the credit card company is still well-known for its cash flow underwriting technology, offering an alternative for people who either have no credit or have poor credit reports and scores, according to credit expert John Ulzheimer, formerly of FICO and Equifax. 

Petal’s technology appears to align with Empower’s underwriting business that assesses consumers using nontraditional data rather than credit histories.

“While it’s unknown what Empower will maintain from their Petal acquisition, it seems to make sense to fold in their cash flow tech to existing underwriting practices,” Ulzheimer said.

What happened to Petal last year?

The acquisition was announced earlier this month, nearly a year after the Petal card brand came under fire for downgrading customers to an annual-fee card. Some customers who had either the Petal® 1 “No Annual Fee” Visa® Credit Card* or Petal® 2 “Cash Back, No Fees” Visa® Credit Card, both of which have no annual fee, reported that the company had downgraded them to the new Petal 1 Rise* card, which charges a $59 annual fee and has a higher variable APR than the other two cards.

The Petal 1 Rise also included a 3% cash-like transaction fee with a $10 minimum (cash-like transactions include money orders, person-to-person cash transfers like Venmo or CashApp, lottery tickets and gift card purchases), a late fee of up to $40 and a returned payment fee of up to $29.

For a company that promoted itself as an inexpensive way to build credit, the new terms were much different than the previous Petal cards. Users who signed up for one card were ultimately forced into an ultimatum: They could either accept the new terms and pay the annual fee, which could be difficult on a limited budget, or cancel their card, which could damage their credit score. 

What’s more confusing is that both the Petal 1 and Petal 2 cards are still available with no annual fee. And while both cards are still great credit building options for users, CNET no longer recommends them since there’s no guarantee you won’t be downgraded to the lower-tier Petal Rise.

What happens next?

For now, Petal cardholders will likely not see much change immediately, but the new influx of money from an acquisition could change users’ experience, according to Steele. 

“Petal has been struggling as a company and its acquisition could offer it new resources, or it could result in a significant change to its business model,” Steele said.

In the meantime, current Petal cardholders can wait it out to see if there are positive improvements or find a new credit card altogether. 

If you decide to close your Petal account and apply for a card from a different issuer, consider keeping your Petal account open during the application process so your current credit line can help demonstrate your creditworthiness.  

Card alternatives for Petal users

If you’re looking to trade in your Petal card because of the downgrade or acquisition and your credit score is still low, you may want to consider applying for a secured credit card, which typically requires a security deposit.

“I strongly recommend those with fair or poor credit consider a secured card with no annual fee, rather than an unsecured card with numerous fees,” Steele said.

Specifically, Steele recommends cardholders with fair or poor credit get a secured credit card like the Capital One Platinum Secured Credit Card* or the Discover it® Secured Credit Card*. The Capital One Platinum Secured Credit Card lets users begin building credit with a security deposit as low as $49 and no annual fee. The Discover it® Secured Credit Card has a credit limit range of $200 to $2,500 that is directly proportional to the deposit amount. It doesn’t charge an annual fee, and it lets users earn cash-back rewards.

If you’re a Petal cardholder who’s been using your card responsibly for at least a year, you may qualify for an unsecured credit card with no annual fee. If you’re going this route, Steele recommends applying for a simple card from your bank or credit union.

*All information about the Petal 1 “No Annual Fee” Visa Credit Card, the Petal 1 Rise, the Capital One Platinum Secured Credit Card and the Discover it Secured Credit Card has been collected independently by CNET and has not been reviewed by the issuer.

Finance chiefs from the Group of Seven countries on Wednesday reaffirmed their view that excessive movements in foreign exchange rates can have adverse effects on economic stability.

A joint statement released after their meeting in Washington also said they will “ensure close coordination of any future measure to diminish Iran’s ability to acquire, produce, or transfer weapons to support its destabilizing regional activities.”

The finance ministers and central bank governors of the world’s major industrial democracies, including Japan, Germany and the United States, condemned Iran’s unprecedented attack on Israel over the weekend in retaliation for a strike on its embassy compound in Damascus on April 1.

The ministers and governors held talks on the sidelines of the International Monetary Fund and World Bank spring meetings.

They reconfirmed the group’s 2017 exchange rate commitments, at a time when the Japanese yen and many other currencies have fallen sharply against the U.S. dollar on the back of robust growth in the world’s largest economy and receding expectations of an interest rate cut by the Federal Reserve in the near future.

The G7 members reaffirmed in Italy in May 2017 their “commitments to market determined exchange rates” and agreed to “consult closely in regard to actions in foreign exchange markets.”

They also recognized at the time that “excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.”

The meeting on Wednesday, chaired again by Italy which holds the G7 presidency this year, was dominated by geopolitical risks to the global economic outlook, mainly from Russia’s ongoing war against Ukraine and the escalating tensions in the Middle East.

They said the seven countries, as well as the European Union, will continue to assist Ukraine in meeting its urgent short-term financing needs.

To ensure Moscow pays for the damage it has inflicted on Ukraine, they said the G7 countries will continue to explore “all possible avenues” for using frozen Russian sovereign assets to help the war-torn country.

They suggested reaching a conclusion by the group’s summit in June on how best to use the assets in line with their respective legal systems and international law.

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