A digital bank founded by a PayPal alum launched ‘Assist’ to offer 3 months of interest-free credit to customers who have lost work or been hospitalized

via Business Insider

One is digital banking platform under Coastal Community Bank. It was cofounded by Bill Harris, the former CEO of PayPal, Personal Capital, and Intuit, with the intention to provide a more valuable bank account for middle-class Americans who may have a tight budget or live paycheck to paycheck.

One is designed to make it easy to save for different goals in one account, offering a competitive APY (1% on your savings and 3% on any money you automatically set aside for savings from direct deposits), and providing a line of credit.

The digital banking platform is still in its private beta mode, so it has not been released to the public yet. One will be gradually setting up waitlist members with an account throughout May. Brian Hamilton, CEO of One, told Business Insider One should be available to the general public in June or July.

On April 28, One introduced its Assist feature, which offers a line of credit interest-free for three months. Customers who are using the private beta version can apply for Assist now, and as soon as people join One from the waitlist or sign up for an account this summer, they’ll be able to apply for the program.

Under normal circumstances, One members can access a line of credit interest-free for one month. The Assist program increases the interest-free period to three months for members who have experienced a job loss or been hospitalized.

A three-month interest-free line of credit could be useful for people whose finances or health are impacted by the coronavirus. When the interest-free period ends, you’ll pay 1% per month (or 12% APR) on your outstanding balance, making the Assist program more affordable than using a credit card and maybe more affordable than paying overdraft fees, depending on how much you overdraw.

Should you take out a line of credit through Assist?

You must bank with One to be able to apply for Assist, so the program is best for people who are already interested in or open to using the One digital banking platform. If you’re someone who likes the idea of an online-only hybrid savings and checking account that lets you save for different goals and offers a competitive interest rate, you may like using One.

The Assist program is intended for people who have faced financial hardship due to job loss or health complications — meaning it could be useful for people who have been impacted by the coronavirus. However, Assist will still be available after the coronavirus pandemic ends, so the program could be helpful if your job or health are affected by factors other than the coronavirus.

The pros of taking out a line of credit through Assist

You have access to a line of credit interest-free for 3 months

When you tap into your One line of credit through Assist, you won’t pay interest for three months.

One’s lines of credit operate by calendar months. If you borrow money near the end of the month, your second month will begin just a few days later, on the first of the following month.

However, as with many banking institutions, One offers a grace period for payments. After your three-month period ends, you still have 21 days to pay back the amount borrowed before you have to pay interest.

“It works very similar to a credit card, where as long as you pay it before the grace period is up, then you don’t pay any interest on that balance,” Hamilton said.

This means that if you tap into your line of credit at the beginning of the month, you could have up to 3 months and 21 days to pay back the money without interest.

You may be able to use funds as overdraft protection or as a discretionary line of credit

There are two ways to access your line of credit through Assist.

Your first option is to overdraw your One bank account. If you have been accepted into the Assist program and overdraw your account, you won’t pay an overdraft fee or interest on the amount you overdraw. Instead, you’ll be tapping into your line of credit. The money you deposit into your One account later will replenish your account, so the Assist program acts as a payment advance.

“Essentially, an overdraft protection line is the right way to think of it,” Hamilton said. 

The second option is to use your line of credit as discretionary credit, like you would use a credit card. “If you have the paycheck coming into the account, it unlocks the ability for you to spend against that credit line with the [debit] card,” said Hamilton. “So essentially, it turns it into a credit card.”

To qualify for this method, you must have a direct deposit set up with your One bank account. As with a credit card, your borrowing limit is determined by several factors, one being your income, which One evaluates by looking at your direct deposits.

When the interest-free period ends, you’ll pay 12% APR on your outstanding balance

After your three-month interest-free period ends, you’ll start paying interest on any amount you haven’t paid back yet. The interest rate is 1% per month, or 12% APR, which may be lower than what you’d pay on a credit card.