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When you need to build or rebuild your credit, you can find yourself caught in a frustrating paradox. To get started, you need to open a new credit account, but when you have bad credit, that's not always an option. One strategy is to open a secured credit account, which first requires you to submit a refundable security deposit. Amazon offers a type of secured credit account called the Amazon Credit Builder. Let's take a look at how this works and see if it might be a good option for you.
How Amazon Credit Builder Works
Amazon.com offers two different versions of its Credit Builder account, the Amazon.com Store Card Credit Builder and Amazon Prime Store Card Credit Builder. Both are issued by Synchrony Bank. Like Amazon's standard Store Card and Prime Store Card, these accounts only allow you to make purchases from Amazon.com, as they are not part of a payment network such as Visa, Mastercard or American Express.
Instead of offering an unsecured credit line, the Credit Builder cards require you to submit a refundable security deposit before your account can be opened. The size of your security deposit becomes the amount of available credit that you can spend at Amazon.com.
If you have an Amazon Prime membership, then you can receive the Amazon Prime Store Card Credit Builder, which offers you 5% back on all purchases or a promotional financing offer. Otherwise you'll receive the Amazon.com Store Card Credit Builder, which doesn't offer rewards. Either way, there's no annual fee for these cards.
Once you start using your Amazon.com Store Card Credit Builder or Amazon Prime Store Card Credit Builder, it will work just like any other store credit card. You'll receive a monthly statement and be required to make at least a minimum monthly payment on the account. And if you don't pay your entire statement balance in full, then you'll incur interest charges.
Amazon will report your balance and payment information to the major consumer credit bureaus (Experian, TransUnion and Equifax). And with responsible use, the card will add to your positive credit information and you could see your credit score climb. Eventually, you could even be eligible to upgrade your card to a standard unsecured card and receive your deposit back.
What's to Like About the Amazon Secured Card
This card offers a way to rebuild your credit with no annual fee and few other fees. And although it's a store card that's not part of a larger payment network, Amazon is one of the largest stores in the world, with a selection of over 100 million items.
Better yet, Prime members are able to receive 5% back by using an Amazon Prime Store Card, including this secured card version. Prime members can choose a promotional financing option instead of receiving 5% back on their purchases.
Most important, you can qualify for this card with bad credit, and balance and payment information will be reported to the major consumer credit bureaus to help get your credit score back on track. This option helps customers rebuild their credit when they aren't able to qualify for a standard, unsecured credit card.
Disadvantages of the Amazon Secured Card
The main downside of this card is that it can't be used for purchases from merchants other than Amazon. Competing card issuers offer secured credit cards that are part of payment networks like Visa, Mastercard and Discover, which give you wider purchase options. And while many of these cards have annual fees, some do not.
If you're a regular Amazon customer who needs to rebuild your credit, these secured Credit Builder cards could be a good option for you. By offering a no-fee option for those with bad credit, and rewards for Prime members, they may benefit Amazon devotees.