If you have bad credit or no credit and really love shopping with Amazon, ecommerce’s big daddy has a new credit card option to consider.
The credit builder version of the Amazon Store Card offers 5% cash back on Amazon Prime purchases, no annual fee, and a $40 gift card after opening your account (once your opening deposit clears). Credit Builder users also have access to zero-interest financing offers on for some purchases that hit a spending minimum.
But unlike Amazon’s regular store card, this one is secured. When you apply, you set the credit limit between $100 and $1,000 and submit a security deposit for that amount to Synchrony Bank, which runs the card for Amazon. When you make on-time payments, all three credit bureaus will be notified. Once you make seven on-time payments in a 12-month period, you’ll have the option to upgrade to an unsecured Amazon credit card.
(To make things more confusing: There’s a Credit Builder Store Card and a Credit Builder Prime Store Card. You only get the cash back if you have a Prime account, but non-Prime users can still get a secured credit card through Amazon.)
What’s the interest rate on this credit card, you ask? Oh boy. The APR for new Amazon cardholders is 28.24%, an amount that hurts my soul.
But 28% isn’t uncommon for credit cards these days, especially when you look at secured credit cards (about 20%) and store-specific cards (2018 average: 25.64%).
That interest rate is a big risk if you’re not great at managing credit, no matter how much you want to improve, and the retroactive interest on its 0% financing offers could come back to bite you. But since those risks aren’t unique to Amazon’s credit card offerings, big time Prime shoppers (looking at you, people who get toilet paper delivered) may find the 5% cash back substantial.
But let’s not be naive. By extending credit to people who typically weren’t eligible for its credit cards, Amazon is doing two things: making money off your purchases and making money off whatever deal it made with Synchrony to manage your card.
And we’re getting really close to Prime Day, Amazon’s annual birthday celebration that offers plentiful discounts—some on items you may desire, and some on items no one desires.
If you’re truly concerned about building your credit, you’d do best to visit your local bank or credit union to get a secured card. If you’re jumping out of your seat for Amazon’s new credit card, you had better have rock-solid control of your budget.