Credit Karma reinvents cash-back rewards with instant payback

Credit Karma Money, a new checking and savings account from the company best known for its credit monitoring service, recently launched a significant new feature. Called Instant Karma, the program rewards users by randomly refunding purchases. So far, since launching the feature, Credit Karma says it has rewarded 100,000 transactions, worth $5 million.

I spoke to Poulomi Damany, general manager at Credit Karma, who said the idea behind Credit Karma Money is to “change people’s relationship with money.” Credit Karma Instant Karma is an extension of that goal.

The process works differently from other cash-back offers. For one, this product is linked to a debt card rather than a credit card. Credit Karma Product Manger Kyle Thibaut says that’s by design, as their target demographic tends to stay away from credit cards. Second, the refund, though random, happens instantly. Swipe your card at a grocery store, and if selected, the money spent on the transaction is refunded instantly.

“Gen Z do not necessarily like credit cards,” Thibaut said. “When you talk to them, they like debit cards and debit cards are the way they spend. Debit card usage is higher than credit cards in the U.S., and it’s actually growing while credit card usage is declining.”

According to Damany and Thibaut, a large portion of Credit Karma’s 110 million members are millennials and this product, along with Credit Karma Money, are targeted at this demographic. They say this model lines up better with the spending habits of this generation, who are generally not optimizing their spending to maximize credit card rewards.

At this time, the company is unwilling to share user numbers for Credit Karma Money and the amount of users who received a refund from Instant Karma. The company says it is saving those numbers for an upcoming earnings release — Credit Karma is owned by TurboTax maker, Intuit.

Update: A previous version of this article stated that Instant Karma works with Credit Karma’s savings account. The company says the programs are different, and the program for the saving’s account is being renamed Savings Boost.