Have Trouble Building Credit? Amazon's New Card Can Help

Jill Jaracz
September 24, 2019
Amazon Credit Builder

It usually takes a credit history to get a credit card, but for many people, that's a chicken and egg story. If you can't get credit, how are you going to build a credit history?

Likewise, if you've had a run of bad luck that has hurt your credit history, it can be just as difficult getting banks to offer you a credit line again so that you can prove you're worthy of having a credit card.

One product that can help you build credit is a secured credit card, and Amazon's partnered with Synchrony bank to launch Amazon Credit Builder, a secured store card designed to solve the problems that consumers have with establishing themselves as good credit risks.

One big difference between a secured credit card and a standard credit card is that you set the credit limit up front, but that's because your credit limit is based on the amount of security deposit you can put down. For this card that limit is between $100 and $1,000. This is set deliberately lower than standard credit cards to allow you to prove that you can pay off your balances on time and not run up a huge amount of debt.

The security deposit gives the bank a little piece of mind that someone with no or poor credit history makes their risk worthwhile. While you can't use this money to make card purchases or payment, the deposit is refundable when you close your account.

For many people who are considering a secured credit card, coming up with a large deposit can be tricky, which is why it starts out at $100. If that's the only deposit you can come up with, that's what your credit line will be. With the Amazon Credit Builder card, you're not allowed to change your deposit amount or deposit more than the $1,000 upper limit.

The key to building a good credit history is making timely payments, so one of the rules of the card is making at least minimum monthly payments on time every month. Amazon offers automated payment and email alert options to help with that.

Amazon will report your payment history to the credit bureaus to help you build credit. After seven consecutive on-time payments within a twelve-month period, a clean credit file--meaning that you haven't filed bankruptcy, been foreclosed upon, had something repossessed or been delinquent on payments recently--and your credit score is at a level Synchrony Bank thinks proves you're a responsible consumer, you may get upgraded to an unsecured card. If this happens, you'll get your security deposit back.

Like most store brand cards, the interest rate on Amazon Credit Builder is high. In this case, the APR is 28.24 percent. That can add up quickly if payments are carried over from month to month.

However, Amazon does offer special financing for larger purchases, but you have to pay off the purchase within the specified timeframe. If you don't, you'll have to pay the interest that's accrued. What constitutes a large purchase starts at $149, and the zero percent financing terms range from six to 24 months, depending on the purchase amount.

Another payment option is the Equal Pay Offer, which is only available for certain products, and eligibility is noted at checkout. If you make equal monthly payments on those products, you won't pay interest on them until they're paid in full. That said, this might be higher or lower than your minimum payment--if it's lower than your minimum, you'll still need to pay for the minimum.

If you also get an Amazon Prime membership, which is $12.99 a month or $119 a year, you can get upgraded to the Amazon Prime version of the Credit Builder card, which allows you to earn five percent back on eligible purchases--though not on items that fall under the Equal Pay Offer. You'll get points for every dollar spent, which you can use as a statement credit.

The card has no annual fee and offers zero fraud liability. As an option for building or restoring your credit, this card can be helpful, but in order to get your credit history on track, it's essential to use it wisely. Otherwise, you might have to pay more than you bargained for.

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