How Does Chime Make Money?

How Does Chime Make Money: All You Need To Know

Chime is a growing financial technology firm. It provides customers with a method to manage their money without the fees and complications associated with traditional banking. Chime, which was founded in 2012, has seen enormous growth over the last decade, with a current estimated value of $25 billion.

Chime is wonderful from a user standpoint, and I love its commitment to assisting individuals in better managing their money. Because they are not classified as banks, they are able to avoid many of the processes that drive people with lower incomes into debt.

But how exactly does Chime make money? After all, there are no fees for using Chime, and there are no overdraft fees. There’s an easy fix to this, and I’m intrigued by Chime’s business model.

Chime is wonderful from a user standpoint, and I love its commitment to assisting individuals in better managing their money. Because they are not classified as a bank, they are able to avoid many of the processes that drive people with lower incomes into debt.

But how exactly does Chime make money? After all, there are no fees for using Chime, and there are no overdraft fees. There’s an easy fix to this, and I’m intrigued by Chime’s business model.

The Bottom Line Up Front

Chime earns the majority of its revenue via interchange fees, which have no impact on customers; Chime also earns a tiny amount of money by taking a portion of the 1.5% transaction costs that merchants must pay to Visa. These tiny, consistent amounts gradually build up.

Chime also earns money from ATM fees when users withdraw money from machines outside of Chime’s networks.

It also earns money by charging interest on short-term loans made to other financial institutions. Again, this has no effect on customers but does generate an income stream for the company.

How Does Chime Work?

Chime is a financial technology firm. It works by providing consumers with free mobile banking services. Users will gain access to Chime’s online banking system as well as Visa debit or credit cards after signing up.

There are many benefits for customers, including:

  • The ability to open a savings account or a checking account with a physical debit or credit cards
  • No fees, including overdraft fees
  • Making and receiving payments (similar to other online services like Zelle)
  • Super-fast, easy online service using the app
  • The ability to withdraw cash at 38,000 locations, free of charge
  • Features like Automatic Saving, which immediately transfers 10% of a paycheck into a savings account without users having to do it themselves
  • The ability to access wages early, avoiding debt-spiraling payday loans
  • Credit building assistance using their Credit Builder card.

Chime, on the other hand, is not a regular bank. This implies that account possibilities are limited, and Chime reserves the right to cancel users’ accounts at any moment. However, they are not subject to the same stringent regulations as traditional US banks, and notifying Chime about an account termination has not always been an easy procedure for some individuals.

Chime earns money by collecting interchange fees. This has no effect on clients, but it does offer Chime with a steady cash stream. It has 12 million account holders, and while not all of them are active, it’s safe to assume that the majority of them use Chime’s services on a regular basis.

Chime Founding & History

Let’s take a look at how Chime came to be.


Chime was launched in 2012 by Chris Britt and Ryan King. A San Francisco tech start-up was created to create a modern solution to traditional banking and to speed up some of the processes that make traditional banking difficult. They were also dedicated to assisting folks with modest incomes in managing their money.

Britt stated in an interview with Goldman Sachs that he ‘wanted to serve a broad swath of Americans who had accounts at traditional banks and just weren’t happy with those interactions.’

This market void was ideal for Chime. It was designed to make money management easier for everyone, even low-income customers. For example, they allow users to take money from their paychecks a few days early; this is a benefit for those living paycheck to paycheck.

Their credit-builder card was another popular draw for this demographic, allowing those with no credit to improve their score slowly.

Public Launch

Chime first came to public attention in 2014, when it appeared in an episode on the Dr. Phil Show (in which Dr. Phil gave a pre-loaded Chime card to a woman under terrible circumstances).

They received money from multiple private sources and purchased Pinch, a comparable financial start-up, in 2018.

With Pinch’s co-founders on board, Chime grew rapidly, eventually reaching 12 million members by 2021. Furthermore, it continues to attract private investment.

Covid-19 Response

In response to the Covid-19 pandemic, Chime gave applicable users a $1,200 advance on their Economic Stimulus Payment check; this meant that many users acquired their money a week early, easing financial pressure in a difficult time.

Recent times have been tougher: Chime was caught up in the wave of tech layoffs in late 2022, terminating 12% of its workforce in November. Of course, various factors contribute to the downturn in fintech, so this is unsurprising.

At the time of writing, Chime’s co-founder Britt remains optimistic: he described the layoffs as necessary to allow the company to grow ‘regardless of market conditions and is still hiring for certain key positions. They’re also expanding into Canada.

The company’s IPO date is yet to be confirmed but is expected in 2023.

How Chime Makes Money: The Revenue Model Explained

To put it simply, Chime makes the majority of its income via interchange fees (or transaction fees), similar to companies like PayPal and Square. But how does it work, and how much money can they make from this strategy?

Interchange Fees

Chime is not a bank in its own right. It collaborates instead with two local banks, Bancorp Bank and Stride Bank. Although some refer to Chime as a “neo-bank,” the founders want to be known as a fintech business. (This is especially significant given that a California regulator expressly forbade Chime from referring to itself as a bank.)

Chime makes a little profit by taking a portion of the transaction fees payable to businesses when an account holder uses their debit card. Chime receives a part of the fees that merchants pay to Visa for each transaction.

With so many people, these tiny costs can pile up. Assume a typical Chime user taps their card numerous times per week; each time, Chime receives a portion of the cost, regardless of the size of the purchase.

This makes sense from a user standpoint as well; by using Chime, users save account fees, overdraft charges, and ATM costs, making them more likely to utilize Chime to save money. With 12 million users, there are a lot of tiny transactions to earn money from.

ATM Fees

Chime customers get access to 38,000 ATMs via the networks VPA and MoneyPass. Customers can use ATMs from other networks, but they must pay a $2.50 fee to do so.

Chime earns a portion of this price. While not its primary source of income, it accounts for a significant portion of company revenue.


From a customer standpoint, Chime’s automated savings feature is excellent: it takes a percentage of users’ paychecks and transfers it immediately to a high-yield savings account. Furthermore, Chime can lend this cash to various financial institutions in the short term, earning them a reasonable interest rate.

This has no effect on users, but it does increase Chime’s revenue.

Chime’s Market Cap and Stock Performance

According to the most recent market valuation, Chime is worth roughly $25 billion. It earned approximately $1 billion in revenue in 2021 alone.

Chime’s initial public offering (IPO) was set for March 2022 with Goldman Sachs’ support, but it was moved back to the end of 2022. We’re still waiting for 2023, but co-founder Chris Britt has declared that Chime intends to become an independent public company.

For the time being, investment is limited to private funds. Chime, on the other hand, is one to keep an eye on. While there is a decline in fintech (as evidenced by Chime’s recent round of layoffs), Chime provides what many consumers are seeking, so once the remaining uncertainty in the digital sector disappears, it will be a strong contender and may be a good one to invest in.

Chime’s Future and Business Strategy

We’re looking forward to Chime’s IPO, which will be a significant milestone for the firm. Chime’s future remains bright; current conditions make predicting the timing of its IPO difficult, but that doesn’t mean it won’t go public.

I’d anticipate Chime to invest in more projects to help people develop credit and manage their finances; what this looks like at this point is difficult to predict, but it’s interesting to watch.

Chime’s mission statement appears to be especially focused on the Millennial generation, assisting them in managing their finances. It would be fascinating to watch how they can develop their tools and capabilities to serve this age group, as well as whether they will begin to focus on younger generations (such as Gen Z) as well.

Because Chime is not a traditional bank, the number of financial services it can provide users is fairly limited. Chime may, however, build additional projects to help people manage their finances that do not entail actively managing money (for example, budgeting aid and guidance).

This is a possibility because the co-founders appear to be highly invested in Chime’s user relationship. It appears to seek to fill a ‘customer advice’ void left by tech-savvy Millennials who reject traditional banking.

Chime’s Competitors

Chime’s Competitors

Chime’s main competitors are similar fintech companies, like Oxygen, NorthOne, and Avant.

For example, Oxygen is a ‘modern digital banking platform’ aimed specifically at entrepreneurs and freelancers. They’ve cornered a niche market here and are performing pretty well, raising $20 million in funding, making them one to watch for the future.

Avant is another very similar business. It works with WebBank to offer loans and credit cards, gaining one million users in 2021.

Finally, I think that NorthOne is worth mentioning: it’s a financial tech company aimed at small business owners and has acquired millions of dollars worth of funding from private investors.

These business competitors to Chime are worth watching for future investment if you’re interested in financial tech.

Frequently Asked Questions

Before you go, here are some frequently asked questions about Chime:

Question: How Does the Chime Credit Builder Card Work?

Answer: Chime’s Credit Builder card is a secured credit card to which you can add funds. Then, you can spend up to the amount you’ve invested. This slowly raises the user’s credit score without the risks associated with traditional credit cards.

Question: Is Chime Safe to Use?

Answer: It is completely safe to use. It collaborates with FDIC-insured banks, which means that your money is safeguarded by the US government (up to $250,000) if Chime fails. Chime is secure to use because of this, as well as the security protections in place on the app.
It is worth mentioning, however, that Chime has the right to terminate users’ accounts at any moment and without explanation. In 2021, there was a rash of account closures that caused problems for many users, though these complaints appear to have subsided now.

Question: Is Chime Only Available in the United States?

Answer: At the time of writing, Chime is only available in the United States. However, there may be intentions to expand, with the company launching its first office in Canada.

Chime’s business approach is intriguing. It’s a win-win situation: clients may avoid some of the expenses associated with traditional banking while still taking advantage of Chime’s features tailored to individuals on lower incomes.

Meanwhile, Chime receives a percentage of the transaction fees. This means that every time a user touches their Chime Visa card, they receive a tiny sum. And, while the quantities are small, they are consistent enough to generate a good revenue stream for the company.

It’s worthwhile to keep a watch on Chime’s IPO date. While they’re keeping their cards close to their chests regarding the actual date and they’ve experienced some difficulties in the fintech downturn, I think Chime is set to do well when it becomes an independent public company.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top