Amazon this morning announced the launch of Amazon Credit Builder, a new secured credit card offered in partnership with Synchrony Bank. As the name implies, the card is aimed at those who are looking to build their credit history — either to recover from bad credit or to establish new credit. Like other credit products Amazon has launched, the card’s big perk is cash back on Amazon.com purchases — in this case, 5% back on purchases if the cardholder is a Prime member.
The Credit Builder card also has no annual fee, offers special financing on purchases, and includes protection from unauthorized charges. As a secured card, Amazon Credit Builder requires that cardholders submit a refundable security deposit in order to get a line of credit from the bank. This funding isn’t available for purchases made with the card, but rather serves as a way to establish a credit limit.
The deposit can range from $100 to $1,000, says Amazon, and is submitted either by electronic transfer (ACH transfer on Amazon) or via mail.
To pay off purchases, the card is unique in that it allows customers to either choose to make 12 months of equal payments or 6/12/24-month 0% periods for select purchases.
Also a part of the product is the ability for cardholders to track their credit improvement over time as they use the card to make purchases on Amazon.com.
The cardholders receive access to their own personal TransUnion CreditView Dashboard, where they can view their VantageScore credit score for free, use a simulator to understand how different activities will impact that score, get fraud alerts and access credit education to help them further improve their credit score.
Other financial education provided by Synchrony is also available.
Amazon says that Credit Builder customers may become eligible for an upgrade to the Amazon Store Card after as little as seven months after opening the Credit Builder account, at which time their initial security deposit would be refunded.
Typically, secured credit cards are offered to people looking to improve their credit — but it’s unusual for a retailer to provide their own secured card. For Amazon, however, offering credit to the under-banked or unbanked is another way of expanding its business to a broader market.
Like many online retailers today, Amazon believes that shopping online shouldn’t be a privilege only for the middle class and up. After all, e-commerce sites may often have better deals than brick-and-mortar stores, and the convenience of shopping online can help customers save both gas money and time — the latter a particular issue for those working multiple jobs to make ends meet.
To cater to the under-banked and low-credit customers, Amazon already offers a low-cost version of Amazon Prime for those on government assistance programs in the U.S., including Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children Nutrition Program (WIC) and, as of last year, Medicaid.
More recently, it and other retailers like Walmart began participating in a USDA trial focused on allowing SNAP recipients to shop for groceries online.
While Amazon’s new card may make sense for those on a path to building better credit, it may be better for those who are looking to upgrade to the Amazon Store Card in the future, rather than simply repair their poor credit history.
The card, consumers should note, carries a high APR of 28.24% — higher than the average median APR for retail cards (25.64%).
“This is a solid option for people who are new to credit or rebuilding their credit after prior missteps, but there are some risks to be aware of,” notes Ted Rossman, industry analyst for CreditCards.com.
“It’s always important to pay your credit card bills in full, and that’s especially true with this card. The interest rate is very high — 28.24% — and if you fail to pay a 0% promotional offer in full by the time the term expires, you’ll be charged retroactive interest on the average daily balance going back all the way to the original purchase date,” he says.
However, Rossman concludes that when the card is used properly, the card could be useful in improving credit while receiving the cash-back perk.
Customers can visit the Amazon Credit Builder page to sign up for the card.