Amazon launches secure credit card for people with bad credit

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Amazon this week unveiled a new secured credit card with Synchrony Bank, aimed at customers with bad or no credit history.

the menu – called Amazon Prime Store Card Credit Builder – requires a refundable security deposit, has no annual fee, and offers Prime members 5% cashback on Amazon.com purchases. The consumer must make a deposit of $ 100 to $ 1,000, which determines their credit limit.

The card also offers payout and special financing options on certain purchases.

It’s also the first of its kind, said Ted Rossman, industry analyst at CreditCards.com.

“Secure cards have long been a good way for people to create or replenish credit, and many banks offer them,” he said. “But I’ve never seen a retailer offer one.”

Is Amazon’s card a good choice?

Managing a secure card has traditionally been a good, low-risk way to create a positive credit history for those with credit problems or no credit, said Matt Schulz, chief industry analyst at CompareCards.

In the United States, 53 million people have no credit history and 79 million have subprime loans, according to data analysis firm FICO.

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“Secured cards are basically meant to be wheel drive cards that people use when they are just starting out to help them build credit,” Schulz said.

Amazon’s new credit card also has some perks that many secure cards don’t, like a $ 10 Amazon gift card as a sign-up bonus, he said. But the credit card can only be used for purchases on Amazon, Schulz added.

How does this help my credit?

Synchrony, the issuing bank behind the card, will report your payment history to the three national credit bureaus: TransUnion, Equifax, and Experian. As a cardholder, you also have access to free credit score monitoring and credit counseling.

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“The program responsibly puts credit in people’s hands while giving customers access to tangible benefits such as tools to improve credit,” said Angie Hu, Synchrony spokesperson at USA TODAY.

According to Amazon, you can switch to an unsecured card if you meet certain criteria and make payments on time for seven consecutive months.

“If you’re someone who keeps your balances low, pays your bills on time every time, then it’s possible that you can switch to a new card fairly quickly,” Schulz said.

Disadvantages of the Amazon card

While Amazon’s new card is overall a good option for consumers, the card still has a relatively high APR of 28.24%, Rossman said. The average median APR for retail cards is 25.64%, according to a CreditCards.com investigation.

“Store cards generally charge higher rates in large part because they are easier to obtain,” Rossman said.

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Both analysts said consumers should be particularly wary of the special financing with deferred interest on purchases promoted by Amazon. If you do not pay for the purchase by the end of the promotional interest free period, you will have to repay the interest since the original purchase.

“If you buy something and don’t pay it off within six months, 12 or 24 months, you will likely receive an invoice for any interest that would have accrued on that account since the date of purchase,” Schulz said. .

Follow USA TODAY reporter Frances Yue on Twitter @FrancesYue_


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