Amazon Launches 'Credit Builder' Rewards Card

Amazon has launched a new credit card aimed at people with bad credit. The Amazon Credit Builder is a secure credit card offers in partnership with Synchrony Bank.

It’s prime target is consumers who have bad credit scores or those looking to build credit. The card offers a whopping 5% back on purchases if you are also a Prime member.

The Credit Builder has a range of features attractive to consumers that include no annual fee, special financing on purchases, and protection from unauthorized charges.

SEE ALSO: APPLE ANNOUNCES APPLE CARD, A CREDIT CARD BUILT INTO APPLE WALLET

Like other secured credit cards, the Credit Builder card requires a security deposit that also serves as a line of credit.

Secure credit cards aims to educate

This initial deposit can range from $100 to $1000 which can be transferred by either electronic transfer (ACH transfer on Amazon) or via mail. Purchases can be paid off in equal payments over 12 months or over a 6/12/24-month 0% periods for select purchases.

Cardholders can track their credit score via the TransUnion CreditView Dashboard, where they can see their VantageScore credit score.

The website allows consumers to simulate how different financial activities will affect their credit score and help them to potentially improve their credit score. The card is only able to be used for purchases from Amazon.com.

After seven months with the card, customers will have their credit score reviewed by Synchrony Bank. Some customers will then be offered an upgrade to an unsecured account and have their security deposit returned.

Potential trap

While the card may be appealing for many looking to improve their credit score. However, it needs to be noted that the card carries a high annual percentage rate (APR) of 28.24.

The average APR for cards based in the U.S is 25.64%. While the card offers a 0% interest period on some purchases, failing to pay the card off in this time will mean that cardholders will be charged retroactive interest on the average daily balance going back all the way to the original purchase date.

This could prove to be a devastating trap for inexperienced credit users. It isn’t common for retailers to offer unsecured credit cards, but then Amazon is not your average retailer.

Amazon also offers a low-cost version of Amazon Prime for those on government assistance programs in the U.S., including Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children Nutrition Program (WIC) and, as of last year, Medicaid.

Who needs a credit score?

A person's credit score is very important in the United States. A person's credit score is calculated by three private credit reporting agencies: Equifax, Experian, and TransUnion.

Each lender, whether it is a bank or agency like Amazon reports a borrower’s activities to these agencies, and in turn, they assign a credit score which reflects an individual's financial activity.