How Does Chime Make Money? Business Model of Chime

How Does Chime Make Money

Chime is a popular fintech platform that provides current and savings accounts in partnership with FDIC-insured banks.

Chime primarily makes money via interchange fees charged on card transactions. The company also makes money from out-of-network ATM fees.

Founded in 2013 by Chris Britt and Ryan King, Chime functions as an accessibility layer on top of traditional bank systems. It targets middle-income users with easy access to a variety of financial services. Chime exploded in popularity between 2017 and 2021, going from just 500,000 users to 12 million users.[1] The company’s services are especially attractive to customers who want a hassle-free online banking experience with no hidden charges.

One of Chime’s founding goals was to help people struggling with debt by offering charge-free services and smart payment analytics. To further this goal, it acquired Charlie Finance in 2021 for an undisclosed amount.[2] Chime is currently the most popular neobank platform in the United States, with over 12 million app downloads.[3]

What is Chime & How Does It Work?

Chime is a financial technology company that offers online banking services. It is not a chartered bank but offers its services through partnerships with Bancorp Bank and Stride Bank, both of which are FDIC members.

Unlike some fintech companies that aren’t FDIC members or affiliated with an FDIC member, the company insures deposits up to a maximum amount of $250,000. Chime also supports Visa’s zero liability policy which states that a cardholder won’t be responsible for unauthorized transactions made on their account.

Security is very important for Chime. The online banking service provider features two-factor authentication and fingerprint ID for maximum security.

Designed to be the most user-friendly online banking system, Chime makes sure that its customers never have to touch physical cash. Every single deposit, withdrawal, and payment can be done from a phone. Chime also supports direct deposit, so users can receive their paycheck directly in the Chime account.

To set up direct deposit, all users have to do is fill out a form and get it signed by their employer. This same system also allows Chime users to receive unemployment benefits. The main benefit of setting up a direct deposit to Chime is that users can receive their paycheck up to two days early.

That means that if their payment normally arrives on Friday, Chime users can get it on Wednesday. On top of that, Chime encourages good spending habits by giving its users the option to automatically allocate a fixed percentage of each paycheck. The percentage can be adjusted, and it will be deposited into a user’s Chime savings account.

Chime also has a feature called ‘SpotMe’, which covers overdrafts up to $200 entirely free of charge. Traditional banks usually charge around $35 for overdrafts, which adds up over time. Many customers are forced to close their accounts when they go into a negative balance.In 2020, it was estimated that banks made over $30 billion just from overdraft fees.[4]

But Chime users don’t have to worry about this because, for them, the cost is zero. This encourages guilt-free spending with a Chime debit card and results in satisfied customers.

For the SpotMe service, all a Chime user needs is a direct deposit account. Once the payment arrives from the employer, Chime will simply deduct the overdraft amount. This process is completely automated and hassle-free.

To use Chime, a user just needs to enter some basic details like their name, email, and residential address. Chime doesn’t require a credit check to issue its debit card and has no minimum balance requirements.

Chime has two types of accounts- a spending account and a savings account. The spending account works like a checking account in a regular bank. The savings account works like a normal savings account but with much higher interest rates.

Banks in the United States have an average Annual Percentage Yield (APY) of just 0.1%.[5] With Chime, users can expect an APY as high as 1.5% on their savings account. That is 15 times higher than the national average.

In addition to its excellent interest rates and streamlined banking experience, Chime also has a unique feature called a Credit Builder card. It is a special type of Visa card that doesn’t require any credit checks.

Credit Builder limits are set based on deposits to the Chime checking account. Any user who has received $200 or more via direct deposit is eligible. The card has no annual, international, or service charges.

Chime’s Credit Builder card helps users increase their credit score over time. This is an excellent feature for those who wish to rebuild their poor credit score or start a credit history from scratch. By using the Credit Builder card, Chime members might become eligible for better loan offers and interest rates from various lending partners.

It should be noted that Chime itself doesn’t offer loans. Nor does it have any credit partners integrated into the app. Chime’s Credit Builder card simply helps customers secure better loan prospects for the future.

While Chime is focused on a cashless transaction model, it does allow users to draw cash from ATMs when they need it. Chime has no physical locations. But it has over 60,000 fee-free ATMs across the country.

Users can withdraw cash with no out-of-network charges from Visa Plus Alliance, Allpoint, and Moneypass ATMs located near stores. Walgreens, 7-Eleven, CVS Pharmacy, and Circle K are some of the partner stores that offer Chime members free ATM withdrawals at their locations. Chime users can also transfer money to any bank account.

If the recipient isn’t a Chime member, they have up to 14 days to claim their money by entering their debit card details. The amount sent will then be instantly transferred into their bank account. Money can be sent by entering the recipient’s email or phone number.

The whole process is a lot more streamlined if both the sender and recipient are Chime users. Because Chime is such a flexible and easy-to-use fintech platform, it has over 12 million users. Of these 12 million, it is estimated that nearly eight million use Chime as their primary bank.[6]

That hasn’t been without controversy. The company has gained a bad reputation since the start of COVID due to increase fraud with its card. Car rental companies like Avis and Hertz have even banned the use of Chime cards to protect themselves against fraud.[7]


Business Model of Chime

Chime operates as a frontend for its FDIC-insured bank partners, who handle the actual deposits made by users. The goal of Chime is to acquire new users through its sleek interface and easy sign-up process. Around 70% of Chime’s new users join via referral.[8]

Once Chime has acquired a user, it offers them unique financial services that are not found with traditional banking apps. The company makes its money from interchange charges paid by merchants. Whenever a Chime user makes a payment at a store or e-commerce site using their Chime-powered Visa debit card, the merchant charges a transaction fee.

Each payment network charges different rates. For Visa, it typically ranges between 1.29% + $0.05 and 3.29% + $0.10.[9] This amount is then split between Visa and Chime.

The Chime debit card itself has zero monthly maintenance fees. Chime also doesn’t charge non-sufficient fund (NSF) fees and international fees. The average Chime user makes 50 transactions a month based on non-official estimates from 2019.[10]

Chime makes it convenient for its users to share money and pay online. Thus, they also increase the chance of a user making repeat transactions on their debit card. Once a user is satisfied with all the additional benefits offered by Chime, they tend to use it as their primary banking service provider.

By creating loyal customers who use Chime as their primary payment system, the company generates more money from interchange fees. Customers advertise the product in an organic fashion through referrals, and that’s how Chime acquires new users. Based on estimates, nearly eight million people use Chime as their primary bank.

In the United States, nearly 30% of people use some form of online-only banking service.[11] The share of neobank users has been rising, currently sitting at 9.5%.[12] Currently, nearly 25 million people using some kind of neobank but the market is growing.[13]

Chime is by far the most popular neobank app, holding nearly half of the entire userbase for this market category. It maintains a significant lead in user count over competing services such as Current and Varo.

Chime keeps on growing its market share by offering innovative features to customers. These include SpotMe overdraft protection, charge-free cards, and early salary payment.

The benefit of Chime over a traditional bank lies in its simplicity and user-centric design. Chime’s saving account offers far higher interest rates than a traditional bank. It also doesn’t require the user to maintain a minimum balance or pay maintenance fees on their account.

Because of its flexible nature and lenient membership rules, Chime has acquired a loyal userbase. Chime is one of the top 10 US banks going by the size of its customer base. Based on a 2021 report, it has more users than Truist and TD Bank.

The average age of a Chime customer is between 25 to 35 years. Chime users earn between $35,000 to $75000 each year.[14] The company’s target demographic is low to middle-income adults who don’t have a lot of disposable income and make several small purchases through online stores.

That’s how it maximizes the amount of money made from interchange fees. Chime also guides users into connecting its services with their employers. So, users receive their paycheck directly within Chime and gradually start treating it as their primary bank app.

Chime encourages smart financial decisions by providing analytics on spending, payment histories, and automated savings. Every time a user spends money on their Chime debit card, the app rounds off their transaction to the nearest dollar. Then, it sends the balance into their savings account.

For example, if a user purchases an item worth $1.50, Chime will deposit 50 cents to their savings account. This is a unique rewards system that encourages smart spending and saving at the same time. Chime also gives users the option to automatically segment a portion of their paycheck into the savings account every time they get paid.

By encouraging users to save money and make wise financial choices, Chime gets more longevity out of its target demographic. This results in more transactions, higher engagement with the app, and happier customers. Who then recommend Chime to their social circles.

Chime’s biggest rival is Revolut, as they offer similar services. Revolut is a more comprehensive fintech platform with support for businesses and international trading. It also has a slightly higher annual interest rate compared to Chime, topping out at 1.67%.

Revolut also supports international transfers, which usually arrive in the recipient’s account on the same day. However, Revolut keeps its best services and rewards behind a monthly subscription plan. In contrast, Chime’s Visa card is completely free.

Fewer people use Revolut, which means users can share money more seamlessly with Chime. The Chime app makes it extremely easy to send money to another Chime user.

Chime’s early salary feature is also superior, with payments arriving two days in advance. In comparison, Revolut only supports a one-day advance period.

Chime is a private company and does not release its financials. While the company is estimated to have annual revenue of around $304.7 million per year, it also has considerable expenses. These include things like staffing costs, hosting costs, platform costs, and development costs.

Due to the lack of data on Chime’s financials, it is unclear how profitable the company’s business model is.


How Does Chime Make Money?

Chime makes money from two different revenue streams. These include interchange fees and ATM fees.

Chime is a private company and doesn’t release any data on how much they make from each revenue streams. It is not publicly known how much the company makes from each revenue stream.

Interchange Fees

This is the primary source of Chime’s revenue. Whenever a customer purchases an item or service with Chime’s Visa debit card, the merchant pays a service fee to Visa. This service fee is then split between Visa and the card provider, which in this case, is Chime.

The rate of these fees can vary depending on the store type, card, and many other factors. Visa cards typically have an interchange rate between 1.29% + $0.05 and 3.29% + $0.10.

According to a 2020 estimate, Chime generated $208 in annual gross revenue from each user. Most of this came from interchange fees.[15]


ATM Fees

Whenever a Chime user makes an out-of-network ATM withdrawal, they incur a $2.50 fee. This is because Chime has to pay the ATM and bank networks.

However, Chime also makes a small profit on these fees. Based on a 2020 report, Chime got 21% of its gross revenue per user from ATM fees.[16]


Chime Funding, Valuation & Revenue

Chime is currently a private company, and its financials aren’t available to the public. Right now, it’s unclear what the company is valued at.

However, Chime raised $2.3 billion in funding over nine rounds between 2013 and 2021. Notable investors include General Atlantic, Tiger Global Management, Sequoia Capital Global Equities, and Softbank Vision Fund.[17] In its latest funding round led by Sequoia Capital Global Equities in 2021, Chime raised $750 million at a valuation of $25 billion.[18]

Annual revenue for Chime is estimated to be $1 billion a year as of 2021, according to a report by Forbes.[19] The article also said the company made around $600 million the year before. But there is no official data to verify this number. The company could be making more than that, based on the accelerated growth of fintech and online banking platforms in recent years.


Is Chime Profitable?

Chime is likely not yet profitable because it is still expanding and investing in growth. The company has continued to raise funds, including most recently in 2021. That suggests that Chime is not currently making enough funds to sustain its growth. That’s not surprising for a fintech company that typically requires significant capitalization for growth.

However, the company is likely generating a significant amount of revenue since Chime has been reported to be multiplying its revenue through successive fiscal years. In 2021, the company was estimated to have made $1 billion in total revenue. This is a 66% jump over the $600 million that they reportedly made in 2020.[20]

The company was planning to go public in March of 2022 but delayed their IPO due to the downturn in financial markets and the impact that has had on fintech companies. The company was expecting to have a valuation between $35 billion to $45 billion in their IPO.[21] It is currently focused on increasing its revenue streams and reaching new markets by offering better services to users.



Chime has an impressive business model, but they’re not done yet. They’re going to continue to expand their product offerings and grow their user base as they reach out to new customers.

In the meantime, we think it’s important to understand how this new financial technology model is going to affect the way we do banking. It’s already clear that the financial industry will never be the same—and it’s time for us all to embrace what that means.

We’re really excited about how the industry is shaping up and can’t wait to see what happens next!

Thanks for reading and following along.

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  1. Statista
  2. Chime
  3. Insider Intelligence
  4. CNBC
  5. CNBC
  6. Forbes
  7. Forbes
  8. Visa
  9. The Ascent
  10. Forbes
  11. The Financial Brand
  12. Statista
  13. Statista
  14. Forbes
  15. Axios
  16. Axios
  17. Crunchbase
  18. Forbes
  19. Forbes
  20. Forbes
  21. Forbes

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