Amazon launches secured credit card for 'building credit'

Amazon has expanded its suite of financial services with a credit card that targets consumers looking to build or rebuild their credit.

The online giant has partnered with Synchrony Financial to launch “Amazon Credit Builder,” a secured card that gives customers with no credit or bad credit a way to benefit from rewards that holders of Amazon’s other credit cards receive while hopefully improving their credit history. The new card, which has no annual fee, gives the same 5% back on Amazon Prime purchases as the popular Amazon Store card. But as a secured card, it requires a refundable security deposit (from $100 to $1,000 in Amazon’s case), with the credit line equal to the deposit.

The new program allows cardholders to track their credit improvement over time, and also provides information and tips to help them build credit.   

Ted Rossman, industry analyst for CreditCards.com, called Amazon Credit Builder “a solid option for people who are new to credit or rebuilding their credit after prior missteps. But he cautioned there are some risks to be aware of, including a very high interest rate.

“It’s always important to pay your credit card bills in full, and that’s especially true with this card,” Rossman explained.  “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.”

Rossman noted that as long as the cardholder has enough funds to pay card bills in full, he or she should be able to improve their credit score, get their deposit back and upgrade to an unsecured card in as little as seven months.

The card is very unique, Rossman added, not only due to its secured nature and the 5% cash back offer, but also because it offers two different types of 0% interest (either 12 months of equal payments or 6/12/24-month 0% periods for select purchases).

“If used properly, this card can help you improve your credit while saving on interest or pocketing an attractive cash back return on items you would (hopefully) buy anyway,” he said.

Customers that apply for an Amazon credit card and are rejected, will be prompted for the new offering and asked if they want to apply to “Amazon Credit Builder.”