Personal Finance News

Amazon Teams with Synchrony Financial for New Secured Credit Card

Frequent online shoppers whose credit could use a boost may have a new credit card option. This week Amazon and Synchrony Financial announced the launch of the Amazon Credit Builder. Aimed at customers with low or no credit, the Amazon Prime Store Card Credit Builder is a secured credit card (meaning that consumers make a set security deposit up front) that includes some of the same perks as the non-secured version. For example cardholders who also have Prime memberships can earn 5% cash back on their Amazon and Whole Foods purchases. Plus this particular card includes access to TransUnion Creditview so that customers can monitor their credit progress.

On their help page, Amazon notes that customers considering the Amazon Credit Builder must first apply for the regular Amazon Store Card. While this will serve as a dual application, it will only appear as a single inquiry on the consumer’s credit report. Once approved for Amazon Credit Builder, customers will have 60 days to make their security deposit and open their account. After doing so, they’ll receive at $40 Amazon gift card as a bonus. The company also says that those on their Credit Builder program may have the opportunity to “graduate” to an unsecured card in as little as seven months.

Speaking to CNBC about the new Credit Builder option, Synchrony EVP Tom Quindlen said, “There’s always going to be people that we can’t give credit to — this is a large population that we weren’t able to reach. It’s a new segment of the market.” To Quindlen’s point, a FICO survey from last year found that 11% of Americans have a credit score of 550 or lower. Moreover a significant portion of the population remains unbanked, which often means a lack of credit as well.

A word of caution: those looking to build their credit with Amazon’s new card should ensure that they’re paying their balance in full each month. Not only is this a good habit to get into but, with the Amazon Prime Store Card Credit Builder’s APR coming in at 28.24%, holding a balance on the card can quickly become expensive. Instead cardholders should treat this secured credit card as a debit card and not as a way to finance large purchases.

Overall Amazon and Synchrony’s efforts to create a secured credit card that also offers perks seems like a good idea. While it certainly makes good business sense since it encourages Prime memberships and loyalty, there is also the chance that it could help those with poor credit build up their scores. That said, once again, a secured credit card can only be a smart tool if cardholders aren’t holding a balance and incurring interest.