Amazon Reveals New Credit Card
Amazon unveiled its newest product this week: a secured credit card. The company teamed up with Synchrony Bank to issue the new card to Amazon customers around the world. The card is aimed towards individuals who have poor or no credit history. With this, the company hopes to help people build their credit history over time so that they may move onto unsecured credit cards.
The new card is called the Amazon Prime Store Card Credit Builder. Every consumer who wishes to purchase one can make a refundable security deposit from $100 to $1000 to “secure” the card’s line of credit. The card can only be used on Amazon.com and cardholders are given a $20 gift card upon opening. In addition to this, there is no annual fee for the card and it offers Prime members 5% back on company purchases. The card also features installment and special financing options on specific purchases.
How it Helps
Secured credit cards have been proven to be a good, low-risk way of building a good credit history for those who have poor credit or none at all. Through Amazon’s partnership with Synchrony, the bank will report the user’s payment history to the three national credit bureaus: TransUnion, Equifax, and Experian. This keeps a record of their payments to help improve their credit score. All cardholders also have access to free credit score monitoring and credit advice. If they meet certain criteria, the cardholder can be upgraded to an unsecured card. This requires them to make payments on time for seven straight months.
Ted Rossman, an industry analyst at CreditCards.com, said the card is the first of its kind. “Secured cards have long been a good way for people to build or rebuild credit, and a lot of banks offer them…But I’ve never seen a retailer offering one.” He added, “If used properly, this card can help you improve your credit while saving interest or pocketing an attractive cash back in return.”
However, there are some drawbacks to the card. Amazon’s new card has an APR of 28.24%, which is considered to be high. The average median APR for retail cards is 25.64%. This refers to the annualized representation of the cardholder’s interest rate.
There are also hesitations about the financing options in some situations. If the buyer does not make their payment by the end of the promotional period, they will be required to pay the full interest that has been accruing since their initial purchase.
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