Home Insights Amazon Comes Out With A Credit Card for the Underbanked

Amazon Comes Out With A Credit Card for the Underbanked

by Alan Daniel

Guess who’s looking to serve more customers and expand into a different demographic? Amazon.

In a not so surprising move, Amazon has recently announced that it would provide a credit card for the underbanked.

This is a big deal for a couple of reasons.

Around 25 percent of U.S. households are either unbanked or unbanked.

Out of those who have access to banking services, a significant segment is affected by bad credit scores. According to a 2018 FICO survey, more than 11 percent of the U.S. population has a troublesome credit score, with ranges below 550. While, 4 percent of the population has a “bad” credit score, which means that it falls below the value of 400.

This bars as many Americans from being able to utilize financing and credit services, which only pushes them down the cycle of poverty and inaccessibility to financial benefits.

Amazon saw the problem and has a solution.

Amazon is teaming up with publicly traded bank Synchrony Financial to launch Amazon Credit Builder, a financing program that banks the under- and unbanked, while also lending credit to those with a bad credit history.

What is Amazon Credit Builder?

The Amazon Credit Builder program comes in the form of a credit card, powered by Synchrony Financial. The bank is also known for being the solution provider behind Amazon’s Store card, currently not available to those with a bad or nonexistent credit history.

The retailer allows such people to use the financed credit at Amazon, while also providing them with benefits such as 5 percent cash back on purchases from the online marketplace.

There’s no annual fee.

But there’s one small catch.

These cards come in the form of “secured” financing.

In secured lending, the borrower has to put up an item of interest to have access to financing from the bank. In this case, that security is a refundable cash deposit that equals the amount of funds that a borrower wants to receive from the bank.

For instance, if someone wants to have $500 in Amazon store credit on the card, then they would need to deposit $500 first. This would allow them to use the card as a regular credit card.

As mentioned above, the deposit remains refundable and could be handed back to the borrower if they want to cancel the credit card after clearing the account.

The interest rates for the starter card seem to be equal for all customer segments, starting at 28.24 percent APR.

It Also Educates People About Building Credit

Apart from financing options, the Amazon Credit Builder program also comes with educational lessons. This is done to explain credit best practices to those who have never used a credit card before.

Once the borrowers have used the card for a certain amount of time and have shown that they could maintain a great credit history, they are able to access an unsecured Amazon credit card. This way, they could get their security deposit back and enjoy unsecured financing without putting up any asset for security.

Interested individuals could fill in the application for their Amazon Store Card Credit Builder online. It is also provided as an option to those borrowers who are unable to meet the criteria for Amazon’s other credit cards.

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