Card.com, a prepaid debit card startup in Brentwood, announced Thursday that it has raised $3 million in series A funding to expand its service into credit cards.
The round was led by QED Investors, the private fund of Capital One co-founder Nigel Morris. Participating investors included Anthem Ventures in Santa Monica and Resolute VC in Boston. The investment brings Card.com’s total funding to $4.7 million.
Ben Katz, a former employee of Pasadena’s Green Dot, co-founded Card.com in 2012 to provide what he calls “branchless banking.” The company offers customizable debit cards – adorned with characters such as Waldo or Spock – that are not tied to a bank like Wells Fargo or Bank of America. Instead, the card comes with access to the Card.com cell phone app, which allows someone to deposit paychecks, check balances and find free ATMs.
The debit cards are free as long as customers deposit at least $800 into the account every month. Customers who deposit less are charged a $5.95 fee. Card.com makes its money through those charges and through fees charged to retailers that accept the cards.
Katz said Card.com’s prepaid service is an alternative for people who carry low checking account balances and want to avoid banking fees.
“The top end banks have really good apps and really ubiquitous ATMs and branches,” he said. “But the reason you would use us instead of them is because most banks charge you a high fee if you didn’t keep an average balance of over $5,000 a month.”
Card.com has issued more than 100,000 cards since the service launched in May this year, Katz said. The company has found customers by seeking out enthusiasts – say Trekkies – who would be interested in customizable cards.
Next up for the 16-person company is an expansion into credit cards. Katz said the company raised its latest round to fuel that growth and hire a handful of new employees.
“We needed to raise more money so we could start issuing credit cards as well,” he said. “It’s very complex. In addition to building a profitable marketing enterprise you also have to make sure the customer is a customer that will pay you back.”