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Petal Delivered an Ultimatum to Select Cardholders: Downgrade or Close Your Account

Petal is downgrading some of its Petal® 2 “Cash Back, No Fees" Visa® Credit Card customers to a $96-annual-fee version of the Petal 1 Rise card.

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Petal offers a number of credit cards designed for people with fair credit or no credit history. They’ve been at the top of some of CNET’s best lists due to their lack of fees, accessibility for credit newcomers and cash-back rewards (for the Petal 2 card, anyway). However, last month users reported Petal had notified them that their accounts were being downgraded -- and they would now be charged a monthly fee.

This news comes after Petal®️ 1 “No Annual Fee” Visa®️ Credit Card* users on Reddit reported a similar experience of getting notified that they would be downgraded to a version of the Petal 1 Rise* that has an $8 monthly fee in May.

While this has no effect on new applicants, it’s worth considering before applying for one of the Petal cards. Here’s what you need to know. 

What’s happening with the Petal 1 and 2 cards?

This all started when Petal launched its Petal 1 Rise card. The card, which according to the company “expands access to those who may otherwise be ineligible for Petal 1,” comes with similar features as the standard Petal 1 card but with the addition of a $59 annual fee, a different APR range and a different minimum and maximum credit limit. 

During May, some Petal 1 cardholders were alerted that they would be downgraded to a different version of the Petal 1 that came with a monthly fee. In June, the same thing happened for select Petal 2 cardholders. According to Petal® 2 “Cash Back, No Fees” Visa® Credit Card cardholders on Reddit, they received a Change in Terms Notice (PDF), a copy of which was acquired from Petal and reviewed by CNET’s sister site Bankrate, either via email or after logging in to the Petal app.

The notice alerted them that their account was being downgraded to a version of the Petal 1 Rise card, which features worse terms than their previous cards, including an $8 monthly membership fee (or $96 annually), 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), an up to $40 late payment fee and an up to $29 returned payment fee. The new card terms -- if accepted -- will go into effect Aug. 1.

Who was impacted?

Petal hasn’t stated how it chose which accounts would be downgraded. According to the company, only certain existing Petal card members were affected and new Petal 2 applicants won’t be impacted by this change.

What this means for Petal 2 cardholders -- current and future

Petal originally announced the Petal 1 Rise card as an option for people who couldn’t qualify for either the Petal 1 or the Petal 2. And while this version can make sense if you can’t qualify for the upgraded cards, the real issue is Petal downgrading users to a paid version of a card they didn’t sign up for. 

While it’s true that credit card issuers have the right to set their own rates and fees and adjust them as they see fit (within the constraints set by government regulations), many users signed up for the Petal 1 or Petal 2 cards expecting a way to build their credit with no annual fee. 

Now, some of these users are being told to either accept these new terms or opt out -- which would close their Petal account, a move that can significantly damage their credit score. Closing a credit card can increase your credit utilization -- how much of your overall credit you’re using at one time -- and decrease your average age of credit accounts. Both of these things can hurt your credit score, which is why experts generally don’t recommend closing old credit cards. 

While there’s no way to know if Petal will repeat this move in the future, prospective applicants looking for a credit building card without an annual fee may want to proceed with caution before signing up for a new Petal card. 

What can you do if your Petal card is being downgraded?

Current Petal cardholders who were downgraded to the Petal Rise have a few options. You can continue building credit with Petal and pay the $8 monthly fee or close your account. But before closing your credit card, consider applying for a new card from a different issuer. 

If you’re approved, close your Petal account after that to avoid the new fees. If your credit score has improved since you opened your Petal card, you may find that you qualify for better cards with fewer fees and better terms. Although canceling your Petal card may cause your credit score to dip initially, you can rebuild your credit through responsible usage of another credit card, potentially without a monthly or annual fee.

The bottom line

It’s unfortunate that a credit card geared toward helping people build credit would put cardholders in a position to have to pay monthly fees, after approving them for no-fee options. Imagine building a budget around the “no fee” Petal 1 or Petal 2, hoping to improve your credit score, only to be forced to either close your account and take the hit to your credit or accept a new annual fee that’s higher than many comparable credit-building cards.


While there’s not much you can do to stop your credit card issuer from changing its terms and conditions, you can take actions to minimize the impact to your finances.


Read through and understand the new terms and conditions, decide whether the card is still a good fit for you, and if necessary, apply for a new card before closing out your old one. Remember that credit building is a journey, and while setbacks like these can be frustrating, continuing to practice good credit habits and finding the right credit options to complement your financial situation will help in the long run.

*All information about the Petal®️ 1 “No Annual Fee” Visa®️ Credit Card and the Petal 1 Rise has been collected independently by CNET and has not been reviewed by the issuer.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

Evan Zimmer has been writing about finance for years. After graduating with a journalism degree from SUNY Oswego, he wrote credit card content for Credit Card Insider (now Money Tips) before moving to ZDNET Finance to cover credit card, banking and blockchain news. He currently works with CNET Money to bring readers the most accurate and up-to-date financial information. Otherwise, you can find him reading, rock climbing, snowboarding and enjoying the outdoors.
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