Lucky Card

Thoughts and Interesting Tidbits


Banking as a Service

December 4, 2020

With the release of Stripe Treasury, more people have been thinking about Banking as a Service, or BaaS for short. Why does it matter?

BaaS is a recent phenomenon. In the past, starting your own bank was nearly impossible. Aquiring a banking charter was a very long and difficult process. However, there were many technology companies that wanted to offer banking products or embed banking services within their products. This led to the growth of BaaS.

The space is changing rapidly. More players are entering the market and providing this service. Companies like Synapse, Unit, and others allow anyone to spin up bank accounts on behalf of users through an API.

It's not just challenger banks who can use BaaS. Gig economy platforms, sellers of big ticket items, or any company that needs to issue cards/hold money can leverage these new offerings.

At Lucky Card, we capitalized on this trend. Instead of focusing on the ins and outs of banking, we were able to focus on design and user experience.



Sweepstakes, Lotteries, Contests, and Raffles

November 23, 2020

What's the difference between sweepstakes, lotteries, and raffles? We've done a lot of work on this at Lucky Card. If you plan on running some game of chance - you'll want to read this.

There are 3 things that make a lottery:

  1. Prize
  2. Chance
  3. Consideration
A prize is some reward of value that the winner recieves. Chance means the winner is chosen randomly. And consideration refers to the requirement that participants pay (or do something of value) to enter.

If you have all three of these things, you have a lottery. Individuals and businesses in the US are not allowed to run lotteries, only the government can. A raffle also has all three of these things, but in a raffle there must be a winner, where in a lottery there may not be a winner.

You'll need to remove at least one of these things. If you remove the prize, no one will want to join. If you remove the chance, you have a contest. A contest is where participants pay to enter, and the winner wins by doing something involving skill (i.e. the winner isn't randomly chosen).

If you remove the consideration, you have a sweepstakes. If it is free to enter - you are allowed to give something of value to a random participant. This is very commonly done by businesses. (That's what we do at Lucky Card). However, there are additional complexities invovled in running a sweepstakes.

States have different rules on sweepstakes. Many states require that a winners list be publicly available. Some states (Florida and New York) require sweepstakes to be registered (and prizes be bonded) if the total value of prizes is above some amount. If you're giving away sweepstakes entries with a purchase, you need to accept entries through some free alternate entry method. It's a good idea to consult with a lawyer before running a sweepstakes.



Why You're Probably Losing Money On Your "Rewards" Card

November 21, 2020

You've gotten a credit card! Your bank has promised great rewards - maybe it's 1% back, or 2x points on restuarants, or something else. You use the card for a month and check your rewards balance. It's like $2 and maybe there's a minimum reward withdrawal (Wells Fargo's is $25). Does this sound familiar?

The reality of it is, if you're not spending thousands of dollars a month, your credit card rewards probably aren't going to be worth it. Moreover, when you add up all the fees and interest payments you're making - you might be losing money. Banks design their credit card rewards programs to be deceptive like this.

It's very important to fully understand the costs of your credit card. You need to take multiple things into consideration:

That seems like a lot! Don't worry - we'll go through them here. These fees depend on your card, it's a good idea to understand how much they are.

The annual fee is clear - you should be able to find that easily in your cardholder agreement. This doesn't change based off your behavior.

The balance transfer fee may be charged when you make payments on your card. You should be able to see this whenever you make a payment.

The over limit fee applies when you make a transaction that puts your total spend for that month over your credit limit.

The cash advance fee is charged when you withdraw cash from an ATM using your credit card. These tend to be very high (usually around $10)

The expedited payment fee gets charged when you need to make a payment fast. Perhaps you're going to be late paying your card, and you don't want your credit score to decrease. You're forced to pay this fee!

The returned payment fee is debited when you try to make a payment, but it doesn't go through. This is most common when you don't have enough money in your account to cover the payment. This fee is particularly harsh because it applies when you don't even have enough money to cover your current debt.

The late fees are common. You're charged late fees when you pay your balance after the grace period is up (details on how much time you have to pay are in your cardholder agreement, but it's usually one month)

Interest is what the bank charges you for the time you haven't paid your balance. A certain percentage of your balance that gets added every month, until you pay it off. Credit cards have notoriously high interest rates (around 20% per year).

FX fees apply when you make a transaction in another currency. If you're visiting another country and use your credit card, the bank will charge you a few percent of your transaction to convert your currency to the local currency.

Obviously, these fees are a headache. But building good credit is extremely important. You might think you have no other options and you'll just take the small rewards and high fees. But there is another way!

With Lucky Card, we've gotten rid of almost all of those fees. Since you pay your credit card bill before using the card, there's no interest, late fees, or expedited payment fees. You can't go over your limit either (so there's no over limit fee). We got rid of balance transfer fees as well.

We've also added a prize-linked rewards program to Lucky Card. Every time you use it, you can win up to one thousand dollars. Finally: a card with fun rewards that builds credit and doesn't cost you a fortune!



What Is A Secured Credit Card And Why Is It Better?

November 17, 2020

A secured credit card is like a mix between a debit and a credit card. Essentially, the cardholder deposits money into their account before using the card. Then, the cardholder gets a credit limit equal to the amount they deposited. The card functions like a normal credit card thereafter (you'll get a monthly bill, etc). If the cardholder don't pay their bill, the card company will keep their initial deposit. If the cardholder does pay their bill, they can get their deposit back at any time

So what are the advantages of a secured credit card? First, anyone can build their credit. Since secured cards are less risky for the card company, people with bad or little credit history have a higher chance of getting one. Like any other credit card, when you pay your bill on time you increase your credit score.

There are also some disadvantages. The main one being you need to deposit money before you can use the card. Unfortunately this is a reality that can't be changed. Additionally, secured credit cards tend to have lower (or no) rewards, they can be expensive (annual fees), and tend to look less prestigious than credit cards.

However, some of those problems can be fixed! At Lucky Card, we're building a secured credit card that has really good rewards. The card looks cool, and the best part is that it's free! We've also changed up some of the mechanics to encourage better financial habits. The process of using our card goes like this:

  1. Deposit money into your account
  2. Use your card. Money is subtracted from your balance (like a debit card)
  3. Instantly win $0 - $1,000 right after your transaction
  4. Deposit money again!

This approach is better in a few ways. First, you don't have to worry about paying your bill - you're never in debt. Other secured cards will charge you interest on your "late payments," even though you've already made your initial deposit! By treating the card similar to debit our cardholders also gain another advantage: their credit score can only go up. On the backend, we're making a "loan" to you and then immediately paying ourselves back from your balance. That's how your credit score increases without any debt.



Random Rewards In Products

November 12, 2020

An rising trend in the last few years is the rise of random prizes. Many products have integrated random rewards in a way that wasn't common 10 years ago. The most obvious example is freemium mobile games. Almost all of them drive engagement through variable rewards. Other games like Ultimate Team have seen huge benefits from integrating random rewards into their products. EA reportedly earns 28% of it's revenue (2019) from it's Ultimate Team games, a product with very prominent random rewards.

You also see random rewards in social media. It's deeply built into the product. Refreshing your facebook feed might lead to a photo of someone you used to know, or a funny cat video, or just a boring news article. The variability is part of what makes these products so addicting.

However, this trend is exhibited in other products you might not expect. Prize-linked savings, for example, is a conflation of random rewards with banking. This has never been done in the US before (the regulation was only recently passed). Recently, prize-linked savings products have gained a lot of traction.

Humans love variable rewards. This is evident in things like slot machines and gambling. However, Sports is an example of a quasi-random reward activity. Goals, homeruns, and 3-pointers are dopamine hits. And the misses just make the shots better.

We believe more companies are going to integrate random rewards into their products in the future. That's why we're building products that improve our customers lives, and use random rewards to do so.