Zero raises $8.5 million for a credit card that functions like a debit card

Just one-third of young adults have a credit card, according to a Bankrate survey. It’s partly due to concerns about debt.

A startup called Zero thinks it has a solution to this and it is gearing up to launch a credit card that functions like a debit card. The startup is also raising $8.5 million in a funding round led by ENIAC Ventures, including participation from NEA, Lightbank and others.

With the Zerocard, “you don’t have to worry about going and paying or bill-tracking that on a regular basis,” said founder and CEO Bryce Galen. The company is offering an app that updates in real-time with deposits, purchases, transfers and the net balance available for viewing right away. There’s “no risk of getting into long-term debt because you always know that you’ve got the money you’re spending.”

Yet it also will have the perks of a credit card. Because Zerocard processes on credit card networks, it makes it easier to pay customers a consistent cash back rate between one and three percent, for all purchases.

Users can increase their cash back percentage by referring customers or meeting spending requirements. The card hasn’t launched yet, but the startup claims they’ve added 150,000 people to the wait list, in part because of the incentives to refer new business. It’s set to launch in 2018.

But this isn’t compatible with existing bank accounts. Instead, people will have to sign up for a new checking account with Zero and its undisclosed partner bank.

Zero says that the bank it’s working with is FDIC-insured and Galen insists that it has “structured the product very carefully in order to be fully compliant with all rules and regulations.”

Above all, says Galen, “we’re able to give people better economics and a better user experience than traditional banks.”

Zero is headquartered in San Francisco and has 12 employees.