This new Amazon card could open the door to a 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% 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 can deposit $500, for example, and have a $500 credit limit. The interest rate, or APR, for the starter card is 28.24%.
“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 for an Amazon credit card, 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.