Amazon and Synchrony Bank on Monday announced the launch of the Amazon Credit Builder, a credit account which offers Amazon Prime members 5% back on Amazon.com purchases, and equal pay installments plans or financing options on select items, according to information emailed to Retail Dive.
To get an Amazon Credit Builder account, customers must maintain a refundable security deposit (via ACH transfer, a check or money order) with Synchrony Bank to secure the full amount of their credit line, according to the release. For shoppers who are on a budget, the card allows them to make purchases on Amazon.com up to their credit limit, and they can access free credit guidance and tools.
Customers who use their Amazon Credit Builder wisely could upgrade to the Amazon Store Card in as early as seven months from opening their Credit Builder account, at which point they'll also get their Credit Builder deposit back, according to the company's statement.
This latest move from Amazon encompasses several payments trends, including letting customers pay in installments, tapping into digital banks and creating new ways for consumers to improve their credit histories. Other retailers and brands, including Walmart and Indochino, have packaged perks with their installment plan offerings. Meanwhile, Square rolled out its installment payments feature last year, enabling merchants to accept installment payment plans with interest rates ranging from 0% to 24% APR.
Amazon is one of many companies aiming to attract customers that are seeking to both shop and build or repair their credit. Millennial and Gen Z consumers are particularly wary of credit cards, but Gen Z shoppers are also driving the adoption of digital payments tools.
On the one hand, Amazon Credit Builder's deposit limits risk for both customers and the card issuer, according to Ted Rossman, industry analyst for CreditCards.com. But while Amazon's latest credit offering seems like a good option for those building or rebuilding their credit, consumers need to be aware of the risks involved, Rossman said.
"It's always important to pay your credit card bills in full, and that's especially true with this card," Rossman said in comments emailed to Retail Dive. "The interest rate is very high — 28.24% — and if you fail to pay a 0% 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."