Amazon is making it easier for more people to earn rewards and build credit with its latest card offering.
The Amazon Store Card Credit Builder, issued by Synchrony Bank, is a secured card designed for consumers working to improve or establish credit. It offers identical benefits to the Amazon.com Store Card but requires a refundable security deposit which acts as the credit limit.
“This is a solid option for people who are new to credit or rebuilding their credit after prior missteps, but there are some risks to be aware of,” says Ted Rossman, industry analyst at Bankrate.
Here’s what you need to know about Amazon’s Credit Builder.
Like the unsecured Amazon Store Card, the Amazon Store Card Credit Builder can only be used on Amazon purchases for both Prime and non-Prime members. It also offers the same rewards incentive as the Store Card for Amazon Prime members: 5 percent back on purchases made using the card.
The Credit Builder card is a secured card. Cardholders choose an amount between $100 and $1,000 to submit as a refundable security deposit which serves as the card’s credit limit. Even with the deposit, minimum monthly payments are still due and must be paid each month.
Since this card’s purpose is to help consumers build credit, Amazon and Synchrony make it easy for cardholders to upgrade to the unsecured Store Card once they have proven a history of timely payments.
According to the card’s terms, Synchrony will evaluate Credit Builder accounts in as little as seven months after account opening to determine upgrade eligibility. These evaluations to determine eligibility will have no harmful credit score impact.
The Amazon Store Card Credit Builder offers a $10 Amazon.com Gift Card upon account opening and charges no annual fee. In order to earn the 5 percent cash back reward, you will need an Amazon Prime Membership, which costs $119 annually (or $59 per year for Prime Student).
A unique feature of Amazon’s Store Cards is promotional financing. Purchases over $149 may be eligible for tiered six, 12 or 24 month zero percent Special Financing with required minimum monthly payments. There’s also a 12 month Equal Pay financing option for purchases over $300, which offers 12 equal monthly payments with zero percent interest.
Even with promotional financing, though, you shouldn’t make a habit of charging purchases you’re unable to pay for in full. You could risk incurring major interest costs, and this card is no exception.
“It’s always important to pay your credit card bills in full, and that’s especially true with this card,” Rossman says. “The interest rate is very high – 28.24 percent – and if you fail to pay a zero percent 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.”
Secured cards in general are a great option for anyone looking to build a history of credit or repair a damaged score, and the Credit Builder card may be especially helpful for frequent Amazon shoppers.
For instance, a student looking to build credit while in school who already pays for a Prime Student membership or a parent in the process of rebuilding credit before applying for a loan who completes most of the family shopping on Amazon.com may find their perfect match in the card.
Still, the Credit Builder is a retail card and comes with the high interest rate and usage limitations that may not make it the best choice for you. A general secured card offering that can be used anywhere may be a better fit if your main priority is building credit.
“This is a very unique card, between the secured nature, the 5 percent cash back offer and the two different flavors of zero percent interest (either 12 months of equal payments or 6/12/24-month zero percent periods for select purchases),” Rossman says. “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.”
If you’re working on building your credit score, practice good credit habits along the way, like making timely payments in full, keeping your credit utilization low and practicing patience. Learn more about improving your credit score here.
The information about the Amazon Store Card Credit Builder has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.