Amazon’s new Amazon Prime Visa Signature card, and Amazon Visa Signature card from Chase.
Amazon is finding a way to get its rewards credit card in the hands of more people.
The e-commerce giant partnered with publicly traded bank Synchrony Financial to launch “Amazon Credit Builder” — a program that lends to shoppers with no credit history or bad credit, who would otherwise be exempt from Amazon’s loyalty cards.
“There’s always going to be people that we can’t give credit to — this is a large population that we weren’t able to reach,” Tom Quindlen, Synchrony executive vice president and CEO of the bank’s retail card operation, told CNBC in a phone interview. “It’s a new segment of the market.”
The card has the same perks, like 5% cash back on purchases, that come with the popular Amazon Store card, which Synchrony also powers. These rewards cards incentivize shoppers to use Amazon instead of an alternative and helps drive loyalty within its customer base, Quindlen said. Banks like J.P. Morgan have also bet on rewards cards would theoretically make customers spend more, and in turn bring in more interest and returns.
This new Amazon card could open the door to huge segment of U.S. buyers. According to a 2018 FICO survey, more than 11% of the population has a credit score below 550. About 4% of the population has a “bad credit score,” which according to FICO Score is between 300 and 499. Meanwhile according to a 2017 survey by the FDIC, 25 percent of U.S. households are either unbanked or underbanked.
The program prompts users with financial literacy tools and tips to learn about building credit. For example, it might include a tutorial on why someone should pay a minimum, Quindlen said. Borrowers can eventually “graduate” to an unsecured Amazon credit card once they’ve demonstrated they can pay back the loans.
Reaching further down the credit curve comes with risks. Quindlen said they’re mitigating that by issuing what are known as “secured” credit cards. People have to deposit $500 for example, and have a $500 credit limit.
“It’s putting credit in the hands of people in a responsible way,” he said. Stamford, Connecticut-based Synchrony Bank, which is a subsidiary of Synchrony Financial, also issues co-branded credit cards with Lowe’s, Sam’s Club, PayPal, Banana Republic and other companies.
The new card application sits directly next to the other Amazon cards. If a customer doesn’t get approved, they’ll be prompted for this new offering and asked if they want to apply to “Amazon Credit Builder”instead. They can eventually “graduate” to another Amazon store card, once they’ve built credit history, according to Quindlen.