A New Card Ties Your Credit To Your Social Media Stats (wired.com) 104
Founded by Instagram and finance alums, Karat wants to be the black card in every influencer's wallet. From a report: Spencer Donnelly, who goes by TheRussianBadger on YouTube, has cultivated an audience of nearly 2.7 million subscribers for his gaming videos. For years, business has been rosy. YouTube shares a percentage of the ad revenue on each of his videos, and the money is good enough that playing videogames on camera has become a full-time job. A few years ago, he even incorporated The Russian Badger, legitimizing his YouTubing business. The only problem: No bank would give him a serious credit card. "Imagine that you're making $2 or $3 million a year and they're capping you at $20,000 a month," says Donnelly, which was the best he could get from a traditional bank. Donnelly, like many of the creators who make their living on platforms like YouTube, Instagram, and Twitch, has long felt shunned by institutions that don't understand that his lifestyle is also his business. That makes him the target market for Karat, a new startup offering financial services to the influencer set.
Karat's first product is the Karat Black Card, designed specifically for influencers, with credit lines starting at $50,000. Its perks can be customized (gamers get cash back on streaming services; beauty influencers get perks for product purchases), and the credit limits are determined by an influencer's social metrics, revenue streams, and cash in hand. To issue the cards, Karat has partnered with the payments company Stripe, which launched its own corporate card late last year. For now, Karat wants to be the flashy card in every influencer's wallet. But eventually, the startup could become a one-stop shop for a creator's business needs. Before its official launch, Karat piloted the black card with a small group of successful creators like Donnelly, many with similar stories of financial frustration.
Karat's first product is the Karat Black Card, designed specifically for influencers, with credit lines starting at $50,000. Its perks can be customized (gamers get cash back on streaming services; beauty influencers get perks for product purchases), and the credit limits are determined by an influencer's social metrics, revenue streams, and cash in hand. To issue the cards, Karat has partnered with the payments company Stripe, which launched its own corporate card late last year. For now, Karat wants to be the flashy card in every influencer's wallet. But eventually, the startup could become a one-stop shop for a creator's business needs. Before its official launch, Karat piloted the black card with a small group of successful creators like Donnelly, many with similar stories of financial frustration.
no card limits how much you can purchase monthly (Score:5, Insightful)
It may seem counter-intuitive to people, but if your credit limit is an issue, you can either a) pay more often than once a month or b) OVERPAY when you know you are going to do large purchases. You don't need a special card to spend over your limit monthly.
Re:no card limits how much agenda is pushed (Score:5, Insightful)
Re: (Score:1)
Establishing a "social credit system". Now THAT would be worth something rioting and burning down the businesses involved.
If you can't see why something like this is a shitty idea then you need to be put down.
Re:no card limits how much agenda is pushed (Score:4, Insightful)
We NEED a social credit system. Here in the US, it will be the only way to keep order and keep the crazies at bay. Racist social media post? Good luck buying that new lifted truck or putting that Glock on layaway.
Since you can't go lower than (-1), and since I can't physically bitch-slap you for saying something so fucking stupid, I'll have to settle for this: Fuck you, sideways, with a rusty HIV-and-COVID19 infected chainsaw.
Re: (Score:2)
Re: (Score:2)
Re: (Score:3)
You are right, but you cannot talk down the instant gratification demographic. Or at least not until you can figure out how to instantly stop a spoiled brat from being spoiled.
I recognize that I am very spoiled with my current lifestyle and find it very hard to not judge my economic capacity by my credit standing/limits. Am I a moron for it? You bet, I do recognize that, but I also have other people attached to me that do not understand that... and the sweat off my back is there for them... I do not kno
Re: (Score:1)
I once heard advice along the lines that you can create a fantastic credit rating whole cloth by taking out loans and just putting the money back into the loan payments. It creates a ton of favorable history for your credit report, at the price of throwing some money away on the interest. No idea if it's true, but there are a lot of valid credit hacks out there.
Re: (Score:3)
There's a whole shadow industry around "manufactured spending" of exactly this kind on credit cards, by people wishing to accumulate loyalty points. Basically you look for items purchasable on the card which have highly liquid resale vale, such as gold bars, and keep immediately cashing them in and paying off the card with the proceeds.
Re:no card limits how much you can purchase monthl (Score:4, Insightful)
Also, how could anyone possibly need to spend $50,000 on a credit card every month? That's more than I spend on my credit cards in most YEARS, and that's with almost EVERYTHING I do paid for on my credit card, from homeowner's insurance and Internet service to professional video cameras and NDI encoders and computers. What could anyone possibly need that much credit for?
It's not like they can use a credit card to pay their staff or anything. That's enough to fly first-class to anywhere in the world every day of the month and back. That's utterly insane. I mean, I guess I could see somebody wanting to buy a Tesla with a credit card to get the 1% back.... :-/
I was baffled when my CC company offered me a $20k limit. I don't want that high a limit, because that limit represents my worst-case liability. If I ever need to go over my limit (and I sometimes did back when it was low single-digit thousands), it takes ten seconds online to pay the current balance off, and then I start fresh. But by keeping the limit low, I can rest comfortably, knowing that if some bozos steal my card number, they can't rack up $60,000 in debt before I notice.
So yeah, I don't blame the credit card companies for coughing up a hairball. For a non-corporation to want that high a limit makes very little sense.
Re: (Score:2)
And even for a corporation with only a few million a year in revenue (not profit) without huge amounts of VC funding, it's insane.
Re: (Score:1)
What, you've never heard of those black cards you can buy a plane with?
Re: (Score:2)
Those aren't actual credit cards, they act more like a check.
Re:no card limits how much you can purchase monthl (Score:4, Insightful)
It's not unusual for sole-proprietor in a highly-compensated field to spend mid five-figures in a month a credit card for business and personal expenses. Take, for instance, an attorney that frequently travels - while his clients ultimately cover travel and legal expenses, they initially need to be paid for - our comes the high-limit credit card.
BTW, why worry about what 'bozos' rack up on your card? The CC company is obligated to refund improper charges - you never have to pay it.
Re: (Score:3)
That's mind-boggling. I don't think I could usefully spend $60k in a month as a single individual even if I did nothing but spend money. I can't even begin to com
Re: (Score:2)
Sole-proprietor != single person. It means you have sole control of a business, and have unlimited liability for the debts of that business. You can hire both employees and contractors.
I know two people who run fairly high-revenue SP's and they both rack up 6 digit levels of expenses a month (~3-5 employees/contractors) and have invoice balance due in the 7 and sometimes 8 digit range. Now, neither of them are stupid enough to use credit cards if they wind up with debt to float. If you have a sound business
Re: (Score:2)
It'll never happen - even the most crazed credit comapny will still look at the $2m you made last year and will be thinking whether the customer will become 'last year's guy' and suddenly be worth next to nothing, but with a huge credit debt he'll never be able to repay.
At least "here today gone tomorrow" musicians have some income from royalties on the "where are they now" circuit, a social media person will have nothing.
So I think this Karat card will be looking closely at his social media revenue, and wi
Re: (Score:2)
I don't think you realize how expensive first class flights are... we're talking $5000 per flight, minimum, with some exceptions. International obviously, not domestic, which is actually business, not first.
Or only spend $2-$3 million per year (Score:3)
This person could also love off the $2-3 million thry make each year. Their "problem" seems to be that they can't conveniently borrow more than $20,000/month over what they makes for consumer purchases.
Credit cards are for borrowing money. Debit cards are a way to apend the money you make.
For many decades in the US, and in most countries today, it's common to SAVE 25% of income "for a rainy day". Because shit happens. Shit WILL happen. We don't know exactly what kind of shit and when, but shit will hap
Re: (Score:2)
Credit cards are for borrowing money. Debit cards are a way to apend the money you make.
In America credit cards have more end-user legal protections than debit cards...
...and thats not even getting into the life-impacting difference between $20000 disappearing from your checking account and $20000 being added to your credit card bill.
Anything that happens with the credit card is a number on the bill at the end of the month, and definitely by law can be disputed.
Anything that happens with a debit card is an amount of your money that is gone, and maybe can be disputed if your bank isnt goi
Re: (Score:2)
Doesn't have to be a credit card, could be a charge card instead. A middle ground between credit and debit cards.
Re: (Score:2)
That's actually why I have a cc set up with an automatic payment of $250 twice per month. I put about $100-$200 / month on it, when I'm buying something where the protection might come in handy. I pay no interest since it's always paid off before the due date.
If you want to use it like that, as a charge card that you pay off every month (or more often), $20,000 is probably enough, wouldn't you say?
Obviously you aren't putting your big expenses on a credit card - income and fica taxes are withheld before yo
Re: (Score:2)
Who keeps 20k in checking?
Re: (Score:2)
Re: (Score:1)
"Influencers" (Score:5, Insightful)
More like a bunch of cretinous wankers with a steady revenue stream.
But there's something one must always remembers with useless members of society who seem to be doing well for themselves - be it Youtubers, politicians or sports personalities: they earn money because people like them. Meaning they're the symptom of creeping idiocracy, not the cause.
It has begun. (Score:2)
Here is a documentary [wikipedia.org] of our near-term future.
Re: (Score:2)
There is also this fictional commentary [fandom.com].
Re: "Influencers" (Score:4, Insightful)
Creeping? There have been influential people in society as long as there has been society. Many of them happen to be entertainers and socialites. Older people during the 1920s often complained about the rising popularity of silent movie stars, and the vaudeville performers who came before. We can go back even further, too. In network science parlance, these types of people serve as nodes, connecting disparate networks together. Although they may not be useful to whatever arbitrary criterion of usefulness you have, they have value for other people.
See what you're doing, is picking out certain socially influential people or groups you don't like just to gripe about them. That reveals more about you than it does about society at large.
Re: (Score:3)
Drawing false equivalencies says more about you than society at large. There's a difference between yesterday's celebrities, who were actors, performers and entertainers among other actual professions, and today's "celebrities" whose only measures, as noted by the very topic here, are social popularity.
Yesterday had Elizabeth Taylor who was not only beautiful but immensely talented. Today we have "celebrities" whose claims to fame are fake makeup tips on YouTube yet receive incredible wealth straight out
Re: (Score:3)
And no do
Re: (Score:2)
"earn money" is the wrong way to put it, they "receive money" because people like them, it is not earned.
Who among us can cast the first stone (Score:1)
More like a bunch of cretinous wankers with a steady revenue stream.
How does that description not apply to probably half of Amex Black card holders...
YouTube/Twitch revenue is way less shady than a lot of other large money streams!
Re: (Score:2)
Re: (Score:2)
I know - I don't understand it. Surely logic dictates there must be relatively few successful influencers, and a large crowd of people enabling them (like a sort of modern day rock star). They seem to be endless though - I honestly couldn't tell one from another - but I suppose that's just what getting old seems like.
Nobody's giving him credit (Score:5, Interesting)
Below about $100,000 credit card debt is more or less secured debt now because you can't really file bankruptcy until you reach that point. I mean, you can, but you'll still have to pay it all back and your wages will be garnished (in parts of the South a judge can and will find you in contempt of court for not paying and throw you in jail until your family pays).
Now, why the $20k limit? Because he could easily have 3-5 $20k limits on multiple cards. The card issuers know this, so they only want to expose themselves to that much risk. Around your 6th card you start getting turned down because they know they can no longer get the money from you. So in order for them to take on more risk you have to be so rich or have so much property that you're no longer a risk.
The take away from all this is that Credit Card companies don't have a lot of risk from individual consumers. Their main source of risk is the economy collapsing every 10 years like clockwork (during which time they take on a ton of write offs).
Re: (Score:3)
There should be a class in high school that spends at least a month drilling into people's heads how credit works and how quickly it can fuck your life. Credit card companies don't function too differently from drug pushers when it comes down to it. Quite fr
Re: (Score:3)
There should be a class in high school that spends at least a month drilling into people's heads how credit works and how quickly it can fuck your life.
It's taught just out of high school. It's called 'Getting Married.'
Re: (Score:2)
TV dinners
I like the enchiladas and the teriyaki too.
I even like the chicken if the sauce is not too blue.
Credit is about risk (Score:2)
What you're seeing here is the effects of Big Data. In the 80s, 90s and early 2000s yeah, they'd have given him a shit load of credit. But with Big Data analytics they know he's at high risk. We know that too if we think about it (like I said, if YouTube changes their algorithm
Re:Nobody's giving him credit (Score:4, Insightful)
Below about $100,000 credit card debt is more or less secured debt now because you can't really file bankruptcy until you reach that point. I mean, you can, but you'll still have to pay it all back and your wages will be garnished
Chapter 7 bankruptcy costs around $1500 [debt.org] and eliminates all credit card debt (with the exception of certain non-dischargeable debts and cash advances or luxury goods purchased immediately before filing). Once you file chapter 7, you don't have to pay back credit card debt, your wages cannot be garnished, and all debt collection actions cease. According to Martindale Nolo Research, [lawyers.com] 55% of chapter 7 bankruptcies are due to credit card debt, and over 60% of those are for balances of $20,000 of less. 92% are for $50,000 or less.
TL;DR - people declare bankruptcy for credit card debts far far less than $100,000 all the time, they don't have to pay it all back, and their wages are never garnished.
(in parts of the South a judge can and will find you in contempt of court for not paying and throw you in jail until your family pays).
If you have a judgement against you, and are held in contempt of court for not paying and thrown in jail, the only thing your family might have to pay is a bond to get you out. Your family is never liable for paying any debt you incur, in southern states or any other state. File for chapter 7, and any credit card judgement goes away - along with any other unsecured debt you may have.
Re: (Score:2)
Their main source of risk is the economy collapsing every 10 years like clockwork (during which time they take on a ton of write offs).
Ah, but those late and missed payment fees. It's a good time for credit card companies.
Disclosure: Worked at two credit card companies.
I can't and I don't believe it (Score:4, Insightful)
"Imagine that you're making $2 or $3 million a year and they're capping you at $20,000 a month,"
I think he is full of it. Was this before or after he incorporated? After he incorporated does he pay himself a salary. How much? A lot of the formulas they use calculate how large unsecured credit line they will offer you is pretty heavily tied to salary. If his business really has 2-3mil a year in revue surely he can afford to pay himself a slary large enough to justify a larger personal credit line?
I mean really I have cards with credit lines that large, (lets just say I am comfortable but not making 7 figures anytime soon or likely ever in regular wages), and I was never asked to prove anything. They give you that much just taking your word for it. So don't tell me he can't get a decent credit limit just stating his salary is $600k/y and he works for Russian Bear LTD or whatever, they are not going to dig into unless he trying for a 100K credit line or something. The banks just don't care about small potatoes like that.
Lets be honest lending him more than that unsecured based on him being a youtube star is bonkers any way unless he can show them he has retained those assets, invested whatever. Because we all know he is one episode away from doing something mob find offensive this week and becoming a pariah at anytime.
Re: (Score:1)
Isn't the way this works is that you pay yourself a small salary and take the rest in some other way, like dividends (what was Romney's trick to get a very low tax rate?), or have the company buy and own everything you use? It's very possible that when banks look at his salary, they are looking at a low figure.
Re: (Score:3)
Then you do a business credit card linked to assets with the bank, and a line of credit equal to your credit card limit.
I have a couple credit cards with low limits, and a couple in the $3X,000 range, all approved at different times. At one point I wanted a higher limit because I was travelling a lot and could easily spend $50-60k per month across everything, but decided against it as it was easier to just segregate expenses by card... and buying a $100k car with a credit card seems stupid.
Re: (Score:2)
Technically, you an try this, but my accountant says that this is a sure way of being audited. You can't just avoid paying yourself for running a multi million dollar business and say you're taking $0 salary.
Re: (Score:2)
https://www.fool.com/personal-... [fool.com]
Re: (Score:2)
He was still paying taxes on the value of the stock or stock options that he was being awarded as it was awarded.
He was still paying capital gains (likely long term rate, though), on any sales of stock that he made at a later date.
Less likely to be important, but still, he was being paid in stock in a publicly traded company, which leaves much less room for shenanigans with manipulating the basis of the valuations.
Re: (Score:2)
It's possible to avoid taxes on the grant of restricted shares -- tax then becomes due on sale of said shares but ...
Technically true, but for the most part, he did not sell his shares. He borrowed against their value in order to get cash. So, no taxes paid because there were no
Re: (Score:2)
Re: (Score:1)
Is being audited such a problem? If you don't earn too much, being audited may cost you a significant amount of money. If you are [sorry, your COMPANY is] pulling in millions, an audit may cost you [your COMPANY] the same amount (or perhaps a little more) but it's no longer significant in comparison to the potential savings from the scheme.
Re: (Score:1)
Re: (Score:2)
And denounce racism every time you enter the bus...
The GP is talking about China, not the US. They have no problem with institutionalized racism there.
Re: (Score:2)
Re: (Score:2)
This is what China is doing. Pretty soon you won't be able to ride the bus unless you have enough "influence"
If your business... (Score:3)
Re: (Score:1)
Credit card != credit. The consumer fraud protection of a credit card means that it's useful to have one for online purchases even if you don't need the credit and pay the card balance in full each month. (NB This doesn't explain why $20k / month isn't sufficient. The answer to that may lie in not having understood the value of long-term investments and pension plans).
Re: (Score:2)
The consumer fraud protection of a credit card means that it's useful to have one for online purchases
This is both very true, and also my primary use of credit cards.
But I don't buy things online that cost more than a new PC or a new camera. Expensive items I buy in person, and payments are made via escrow services and lawyers, or through a direct bank transfer.
Re: (Score:2)
So this card is for ... (Score:5, Informative)
From TFA:
We’ve met creators who have over $100,000 in a PayPal account—they’re not even using a bank.
[ ... smacks forehead ... ]
According to Google and the PayPal site, accounts are not FDIC insured nor do they pay interest. At least keep your money in a bank or brokerage money market account (which are are insured and usually offer some interest) and link that to your PayPal account. For example, Fidelity brokerage accounts offer credit cards, money market accounts and even electronic fund transfers and checking on those accounts as well as investments.
Re:So this card is for ... follow up (Score:3)
Further reading seems to imply that money in PayPal accounts is back-end stored in some bank that offers FDIC insurance. If true, this alleviates one concern, but another (I failed to note eariler) remains. PayPay can freeze your PayPal account in certain circumstances, though not your personal/linked accounts, so in the case of a problem, I suspect your money would be better kept in your *own* bank account and linked rather than simply in your PayPal account (and their back-end bank). YMMV IANAB/L
Low credit may be economically rational. (Score:3)
A bank doesn't care how undignified a profession is, what they are about his how reliable the cash flow will be.
Alice cleared two million dollars last year off of rental properties she owns. Bob cleared two million dollars last year as an influencer. Who is a better credit risk *this year*?
Black Mirror (Score:3)
Re: (Score:2)
Came here to apply nosedive tag to article.
Make sure to read the small print (Score:2)
Best check that they don't sell your credit and purchase information to 3rd parties.
1st World problems - and the wonders of Capitalism (Score:2)
I'd dearly like for such a situation to be something other than my imagination — and I hereby promise to not bitch about having a limit allowing me to "only" purchase a low-end new car with my credit card.
Black Mirror: Nosedive? (Score:2)
So... China? (Score:5, Interesting)
Didn't we all call out this horrid idea when the Chinese implemented it several years ago? And now it's being pitched as a good thing?
Re: (Score:2)
Re: (Score:2)
No.
This is not a social credit score. This is a financial credit score that factors in your reach and engagement online.
It's very different and in all of the key ways.
Re: (Score:2)
Sooo... again, the Social Influencer gets a high financial credit score, because of their reach and engagement online. Yet the highly intelligent research scientist who has spent the last year in antarctica, is good at saving money, is very responsible, gets a zero financial credit score because their engagement online sucks.
Good plan.
Re: (Score:2)
No.
The social influencer with $2m/year income gets a $50k credit limit, 2.5% of their income.
The highly intelligent Antarctic research scientist with $60k/year income gets a $5k credit limit, 8% of their income.
Their credit scores may be similar. The research scientist is less likely to default but the card company can make more money offering credit to the influencer. They make a decision based on risk and return.
Finance. It genuinely doesn't give a fuck whether you're a nice person or not.
Remember...way back when last year... (Score:2)
....how we were shocked by the idea of China's 'social credit' system and consequences? Conform, or you can't fly in a plane or travel in public transit?
By "confirm" as of 2019 included donating blood, donating to charity, volunteering for community services.
Negative scores come from dishonest and fraudulent financial behavior, other behavior that some cities have officially listed as negative factors of credit ratings includes playing loud music or eating in rapid transits,[31] violating traffic rules suc
Credit is not a popularity contest. (Score:2)
-You can't take it with you, so it doesn't matter if you are +10,000,000 or -10,000,000.
China called, they want their dystopia back (Score:2)
What an absurd problem to have (Score:2)
"Imagine that you're making $2 or $3 million a year..."
Then why on Earth would I need a credit card? I could pay for things in cash. Unless that isn't real income.
"...with credit lines starting at $50,000"
I am at a loss to think of when someone would use a card in a wallet to make a purchase that is the average annual American household's income.
If you're making $2-3 million a year.. (Score:2)
Also, whatever happened to American Express? I know they're still around, why not use that instead of a revolving credit card?
Finally, do we really want something as mercurial as 'social media stats', whatever the fuck that's supposed to mean, to have anything to do with our real lives in the real world? Sounds like a trap to me, in fact the first thing that came to mind was that one episode of The Orville
First world problems (Score:1)
Really, who gives a shit that some rick jackass can't buy a car on his visa?
Credit != Income (Score:2)
High ticket items are usually not purchased by credit cards. Yes, if you spend $1,000 a month on groceries, you need a credit card. If you are going to buy that $2,000 sound system, again you need a credit card. But if you are going to purchase a $50,000 Tesla, you will be unable to use your credit card.
The same is true for housing, healthcare (insurance/HSA takes care of that), or many luxury items.
Yes, of course there expensive are things you can buy with a credit card, like a designer suit, handbag, or n
Is this about debt? (Score:1)
China-style Social Credit through the backdoor. (Score:2)
And I mean that like a whole foot, heel and all, up to the knee, right up your ass. And of course presented to you as something YOU demand and want, like you are Dobbelfist.
But of course this is America. It is private and not by the government, so it "doesn't count". Just like the rampant Catholiban censorship in US media, that many very brainwashed people even do to *themselves*, is "not censorship". lol
Call me when you find out that soon everybody you can choose does it, and so you will not have that choi
this will not be abused or hacked (Score:1)
Re:Slashdot spins total tracking agenda as a posit (Score:5, Insightful)
social media has absolutely fucking nothing with being a nerd.
My non-nerd friends, which is most all of my friends because I don't like most nerds, have long been puzzled why I have no social media presence. You are some kind of computer geek they wonder, how can you not have a Facebook?.
It is exactly because I am a computer geek that I don't have a Facebook.
Re: (Score:2)
Re: (Score:3)
Back in the 80s and 90s, me and a couple of friends had a great time with computers and networks. You could say we had a social life because of computers. All the popular kids looked down on us nerds. Fast forward to the 00s and 10s, and the very same popular kids are now hooked on Facebook and "smart"phones. It doesn't exactly inspire you to join them.
Re: (Score:2)
Re: (Score:2)