Amazon.com Credit Builder: Build credit with no annual fee

https://www.amazon.com/iss/credit/creditbuilder?pr=conplcc

by lxm • 7 years ago

224 281 7 years ago

This is legitimately a useful service for those who need it. The status quo has created a unintended "chicken & egg" problem wherein people need ok credit in order to start building good credit.

This acts as an escape hatch allowing people to build up their bad credit up to a point where they'd qualify for normal credit cards.

lemcoe93• 7 years ago

There are already dozens of secured credit cards for the credit-challenged: https://www.creditcards.com/secured/

The 5% back on Amazon.com purchases would give a slight edge to this new secured card.

r00fus• 7 years ago

Are there any other secured CCs which would have similar benefits?

If you buy anything on Amazon, but don't have a CC this may be better than 1% back.

deadmik3• 7 years ago

5% back on only Amazon with a $120 annual fee (prime) is not very good.

SilasX5• 7 years ago

Yeah, I was in that bizarre limbo for a while, where annualcreditreport.com and all the other sites would swear up and down that I have a ~730 score, all while I had no debts, but everyone classed me a subprime because I didn't have a credit history.

Even knowing that you can fix it, it's really bizarre that having e.g. utility bills -- which are extending credit to you -- count nothing towards a credit history ... but it does add to your credit history when you simply move your ordinary purchases onto a card that you pay off every month. Huh?

Edit: Reword for clarity.

berdon2• 7 years ago

It's a system created towards incentivizing people to use credit for the purposes of capturing all users. This maximizes the number of users that mismanage their finances and pay interest on the credit usage.

jimmaswell• 7 years ago

Student loans with no missed payments count, even if you haven't had to make payments yet. Very helpful when I was starting out. I'd been getting preapproved offers in the mail throughout the last half or so of college and finally went with one once I had income.

prepend• 7 years ago

This is nice just for the 5% back on amazon purchases. I’ll likely set it up just to wash through all my prime purchases.

ganoushoreilly• 7 years ago

Just pay it off fast as that interest rate is high!

ThrustVectoring3• 7 years ago

Interest rates on credit cards don't matter if you pay off the statement balance on or before the due date.

greenyoda• 7 years ago

Amazon already has a regular Visa card and a store card that offer 5% back on Amazon purchases, so you don't need to get this secured card for that.

https://www.amazon.com/Amazon-Prime-Rewards-Visa-Signature-C...

https://www.amazon.com/Synchrony-Bank-Amazon-com-Store-Card/...

arcdigital2• 7 years ago

If you have okay credit, just get the normal store card.

teraflop• 7 years ago

After reading through the page, I don't see what makes this different from normal secured credit cards which have been around forever. Is it just the Amazon branding and gift-card promo?

diehunde• 7 years ago

I got the cards and unlike other secured cards it didn't ask for a previous deposit and it gave me a much better balance.

lemcoe93• 7 years ago

You get the 5% cashback on Amazon.com purchases. That would appear to be the real value-add here, because you would also get that cashback reward using the non-secured and well-established Amazon.com credit card.

Pieman103021• 7 years ago

You get 5% cashback if you have Amazon prime. Assuming you are a student trying to build your credit, that's $60 a year. That means for the 5% cash back to break even you need to spend $1200 on Amazon per year. That's not obscene, but it doesn't really seem worth it to me unless you use Amazon a lot.

bongobongo6• 7 years ago

It's worse than your typical secured credit card because it locks you into Amazon.com and services that use Amazon Pay. Basically, it's an agreement to buy Amazon products or products through Amazon until Amazon determines that your purchasing and payment habits reflect those of a person with good credit.

People saying that it's great because you get 5% back on Amazon purchases are myopic. Nobody on HN would be celebrating the Starbucks Card Credit Builder where you get a 5% discount on purchases and can build credit but can only do so by purchasing products from Starbucks and its affiliates. Why? Because as others have said, there are already plenty of secured Visa/Mastercard cards out there that don't convert your capital to funnybux and lock you in to a particular vendor and its best buddies.

caconym_• 7 years ago

On the other hand, Starbucks really only sells one sort of thing (food) while Amazon sells many things. Furthermore, Starbucks is a luxury, but on Amazon you can, I think, buy many of life's necessities at competitive prices.

I agree that the motive is not necessarily pure. Furthermore I think Amazon is a huge force opposite sustainable economics, and that the American credit system, credit bureaus, and the symbiotic partners who encourage people to take on debt and prey on them in that vulnerable, owned state, are a diabolical construct engineered for social control and a crime against the American people.

But, I think the comparison with Starbucks is not quite right. This is short-sightedly better and long-sightedly worse, for a lot of the same reasons.

tedmiston3• 7 years ago

Basically, it's an agreement to buy Amazon products...

Nothing about this card locks you into buying Amazon brand products that I can tell. Buying Amazon brand products have the same effect as buying non-Amazon brand products on Amazon.

lxe• 7 years ago

It's secured manually by a deposit, which dictates your credit line. If you don't pay it back, the bank keeps the deposit.

"Normal" cards are not backed by anything.

gwbas1c• 7 years ago

It's not a credit card. (It's not Visa, Mastercard, or Amex)

adrianmonk2• 7 years ago

It's just a terminology thing, so not terribly important, but these types of cards are called "store cards" or "retail cards", and they are usually considered to be credit cards, despite having some differences from regular credit cards.

This card seems to allow you carry a balance from one month to the next, so that means it isn't a "charge card" which must be paid in full every month: https://en.wikipedia.org/wiki/Charge_card

dymk2• 7 years ago

with an eligible Prime membership

So there is a fee, it's a $119/year prime membership

bluetidepro2• 7 years ago

I didn't dig into the FAQ or fine print, but I wonder what happens if you get the card, and then your Prime membership runs out?

EDIT:

The 5% back benefit may apply to purchases (less returns and other credits) made using the Amazon.com Store Card Credit Builder when signed into an Amazon.com account with an Eligible Amazon Prime Membership, including 1-Click orders and purchases made at physical Amazon locations (in each case, where 5% back is selected as the default option or where Promotional Financing is selected as the default option but is not available for the particular purchase).

It seems like the 5% back is only for Prime membership folks. I think anyone can get the card, with or without Prime, though. So then it doesn't have a yearly fee, technically.

dymk2• 7 years ago

They almost surely just close the account after some amount of time. Like any other bank if you canceled your accounts with them.

snuxoll• 7 years ago

It reverts to a standard Amazon.com store card without extra perks.

dean177• 7 years ago

There is no fee. Having prime gives you the perk of 5% cash back but you don’t need it to get a card.

kemitche• 7 years ago

In the terms, there are 2 separate credit-builder cards. Only one requires Prime. The one that does not require Prime is not eligible for 5% back UNLESS the cardholder also has Prime.

4. The Amazon.com Store Card Credit Builder. The Amazon.com Store Card Credit Builder is available to customers with an Amazon.com account, subject to credit approval.

[...]

5. The Amazon Prime Store Card Credit Builder. The Amazon Prime Store Card Credit Builder, an upgrade from the Amazon.com Store Card Credit Builder, is available to customers with an Eligible Amazon Prime Membership only, subject to credit approval.

40acres• 7 years ago

There should be more was for people to build credit within our financial system, this along with some recent efforts by the bigger institutions to incorporate factors like utility bills are a nice step forward.

howard941• 7 years ago

Have you read the terms for those up-your-score programs? If I were a CRA in light of all of my issues from FCRA transgressions to gaping security holes I'd want the entire world in mandatory arbitration for everything.

duxup• 7 years ago

Makes sense as Amazon wants to get to as many people as possible and those who can't keep a card ... might want a handy route to build credit and still use Amazon.

YeahSureWhyNot• 7 years ago

I think most banks had secured credit cards for long time. I got mine from bank of America with 300 deposit which gave me 300 limit. they refunded it after 6 months

Yhippa• 7 years ago

The only drawback I can think of for this is that it's a PLCC and not a Visa or a Mastercard. That said it looks like it's got some neat benefits like the 5% back on Amazon purchases and promotional financing that seem to be on cards for people with established credit.

llsf• 7 years ago

This would have been great when I arrived in US with zero credit history. While I did get secured card from the bank, it took for ever to get a line of credit of more than $500/month. The "monitor/improve your credit score" approach is good too as it can be a very foreign concept when you come from Europe...

Negitivefrags• 7 years ago

Can someone explain to me why America has this strange system of “building credit” while other countries don’t really seem to?

In my country there are agencies that track, for example, the fact that you had a debt collector called on you, but you don’t have to have ever used credit card to get a loan, which seems totally bizarre to me.

When I got a home loan the primary checks were about making sure my income was as I said it was, that I had a stable job, and then they wanted bank statements to see what my expenses were. My existing bank didn’t require statements of course and just automatically worked out my weekly budget from my account.

Why would banks want to trust some arbitrary gameable score when the basics are barely more complicated to check when getting a loan?

devoply• 7 years ago

It's likely just a system (credit score) invented to get as many people using credit as possible. But there is a credit score and that is a result of making payments on time to many different sources of loan and paying them on time over a long period of time. But you don't actually have to keep a balance you can simply pay them off all the time. I use it to avoid paying for using my debit card transactions (which are limited for the free account that I hold). As a result probably all of my purchase history is sold to other companies all the time.

berdon2• 7 years ago

Agreed. The simplest answer is that it's intended to maximize the number of financially irresponsible debtors to maximize interest paid in.

vaseem• 7 years ago

For mortgages what you stated is still the process. It gets expensive to do through investigation and review all documents, pay slips and bank account for something as trivial as say 'buying a phone' or 'getting internet service'. Credit score has its place there

pxeboot• 7 years ago

To make it worse, no credit history equals a score of zero, so it can be worse than just having bad credit.

conanbatt2• 7 years ago

Depends on the use-case. All foreigners that migrate for a job to the us have no credit history, and no significant problems finding apartments and opening bank accounts.

theandrewbailey• 7 years ago

Even worse: paying off all your loans and having no credit cards is zero. It made getting a credit card more difficult. The lady at the credit union couldn't get the system to auto-approve me for any credit limit because of it.

Around here, we like to say a credit score is just an “I love debt score.” Think about it. A credit score doesn’t reflect your salary increases, the amount of money in your savings account, or how well you budget each month.
If someone in your family was to pass away and leave you a million dollars, your credit score wouldn’t change one single point. Your net worth would skyrocket, but your credit score wouldn’t budge. Seems fishy, doesn’t it?
In other words, a credit score has nothing to do with how well you handle your money. But it does show how well you play around with debt. Your credit score is solely built on how much debt you have, what kind of debt you have, how long you’ve had it, and how you’ve paid on it.

https://www.daveramsey.com/blog/what-is-a-fico-score

totaldude872• 7 years ago

I think its easier to build a credit score from "no credit history" than recovering from a bad credit.. so :" no credit history" > "bad credit" in long term

sl1ck7312• 7 years ago

The answer is probably that it is a service that banks and everyone else who uses the scores has decided is worth paying for. If finance institutions wanted to do all the legwork or just decided the credit score was useless they would probably just not request scores from them.

Just my thoughts though, no source to back it up. I'm not aware of any mechanism that requires organizations to use the credit scoring companies.

Spooky23• 7 years ago

Because the score correlates highly to payment/non-payment. If you never borrowed anything before, a lender doesn't know if you are capable of getting and responding to mail, writing a check, arranging electronic payment, etc.

A surprisingly high number of people are unable of handing these basic tasks.

Causality1• 7 years ago

Indeed. I ran into problems for years because I'd simply never been in debt and saw no value in using a credit card over a debit card.

asdff5• 7 years ago

I hope you do now, their best feature is they are a proxy for your bank account.

jdietrich• 7 years ago

A record of successfully repaying debt is highly relevant to whether you're likely to repay your debt in future. Credit risk is only partly about affordability; many people who can afford to reliably repay their debts still fail to do so, for a variety of reasons.

It doesn't really matter to lenders whether you "game" the system; if you're sufficiently organised, responsible and financially stable to take out and repay debts solely for the purpose of improving your credit history, then you're probably a good person to lend to. Americans tend to use a lot of consumer credit, so not having a credit card, a cellphone contract or a car loan makes you anomalous.

I don't know what country you're in, but here in the UK "building credit" is very much a thing; I'd be very surprised if it had no impact whatsoever on your creditworthiness in your country.

https://www.moneysavingexpert.com/loans/credit-rating-credit...

stingraycharles2• 7 years ago

Don’t you think it’s bad for a society to have a system that encourages people to get loans?

I know for the businesses, it makes perfect sense to have a credit system, it’s just that I appreciate it’s not a thing over here: people should incur as little debt as possible.

AnssiH3• 7 years ago

I don't know what country you're in, but here in the UK "building credit" is very much a thing; I'd be very surprised if it had no impact whatsoever on your creditworthiness in your country.

In Finland Luottotietolaki ("Credit Data Act", https://www.finlex.fi/fi/laki/ajantasa/2007/20070527 - no translation) limits the allowed data in credit data registries to specific types of negative entries, such as debt adjustment, failure to pay within 60 days, attachments, etc.

So you can't really build credit as such. 90%+ of people have zero entries in credit data registers.

godelski• 7 years ago

It doesn't really matter to lenders whether you "game" the system;

In this case "gaming the system" means taking on debt and paying it off. So pretty much if you can "game the system" they have good reason to believe that you can pay off future debt. So I'm not sure really why someone would calling "gaming the system." One thing I find nice about the system is that you can not have much capital but still get a good credit score, which tells a bank that you may not be rich but you prioritize paying back debts so you're low risk. Enabling you to get loans you normally wouldn't or ones at a lower rate.

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bdcravens3• 7 years ago

I suspect it's because Americans live far more leveraged lives? We finance everything: our phones, our cars, our lawn mowers, our education. The average student loan debt is about $35k. The average household has over $20k in non-mortgage debt. The average credit card has a balance of over $6k; the average retail card over $1800. The average car payment is $400 (used) and $550 (new). You typically walk into a car dealership and drive away in a few hours with a car worth tens of thousands of dollars. And these numbers are increasing every year. With so much hunger for debt, manually underwriting isn't practical for the smallest debts. (at least not based on most businesses like car dealerships who depend on volume and spontaneity)

https://www.fool.com/the-ascent/credit-cards/articles/the-av...

https://www.usatoday.com/story/money/cars/2019/03/01/care-pa...

Havoc• 7 years ago

The average credit card has a balance of over $6k;

Wow. That’s insane for an average.

SilasX5• 7 years ago

America's not unique in that respect; Canada has the highest consumer debt load out of the G7:

https://www.bloomberg.com/news/articles/2019-03-26/canadians...

adventured2• 7 years ago

I suspect it's because Americans live far more leveraged lives

That's simply not correct among developed nations. It's an old myth that refuses to die.

The US is in fact on the lower side for the OECD:

https://data.oecd.org/hha/household-debt.htm

Countries in the OECD with households in worse shape than the US:

Spain, Belgium, France, New Zealand, Portugal, Finland, Britain, Ireland, Canada, South Korea, Sweden, Switzerland, Australia, Norway, Netherlands, Denmark.

Scandinavian countries for example have household debt to income ratios that are among the worst. Australian and Canadian households are also in worse shape than the US, despite being generally quite affluent (Australia's household debt to disposable income ratio is 2x worse than the US).

The US is comparable to Japan, and just slightly above Germany on household leverage.

More broadly, wealthy nations tend to have households with more leverage than poorer nations. They tend to have highly functional financial systems that facilitate that, combined with consistent, dependable economies.

KallDrexx• 7 years ago

When I lived in Australia for a short period I couldn't get a credit card without a small credit limit due to not having any credit history in Australia (my US credit didn't matter). So it's definitely not just the US.

delinka5• 7 years ago

All the sibling answers are pretty much spot on except for one thing: you're building your credit score; you're setting a track record for your ability to repay debt. Certainly, something similar exists in your neighborhood/region/country. Otherwise, how would anyone know that they'll ever get their money back from you?

The major thing to note here in the US is there are three 'big' companies that track this information about individuals. And (now) there's a fairly standardized method for calculating your score, and that score affects A) whether you can borrow and B) the interest rate on the borrowed money.

Jolter2• 7 years ago

There is no such system that I'm aware of here in Sweden, at least.

If you defaulted on a loan payment before, and it was sent to a collection agency, that's tracked. But that's it.

mabbo• 7 years ago

I believe it has to do with how much Americans tend to borrow, but I'm not sure which is cause and which is effect.

Do Americans borrow so much money that they need additional proof that they can pay it back (via credit ratings), OR, do Americans get the ability to borrow more because there are credit ratings systems to help lenders feel safer loaning money?

Probably somewhere in the middle.

cameronbrown• 7 years ago

It's very much a thing in the UK. One of the (unofficial) minor selling points for young people getting a phone contract is being able to start building a little credit.

kemiller2002• 7 years ago

Essentially, the credit score agencies came up with a reason they are needed. In the past, it was at the discretion of the bank manager on whether or not to approve a loan. The bank manager's job was to know people who banked there, and what type of person they were, upstanding, shady, etc.

Credit scores removed that risk from the bank manager's job, so large banks loved the idea. Now, loans get approved because of some score, and it's the same across all loans for a bank. You don't have the possibility of some employee just approving loans, and making huge mistakes about who to lend to. They also don't need bank managers like they did before, so they can also cut back their responsibilities...and pay.

The whole credit score is actually a really oppressive tool against the poor, and that's why everyone is concerned about it. It affects almost everything you do. Need a car, credit card, etc. Yep, it determines if you get a loan, and how much interest you are going to pay. Guess who gets lower rates, people with higher scores who probably make more money, so they pay their bills easily. It gets worse. The other thing that it affects....is employment. Employers are allowed to pull someone's credit score, when they apply for a job. A number of places equate low scores with irresponsibility and a larger chance of stealing, and so they don't hire people below a certain credit score. Does this make sense? Not really, but the credit score companies make it sound really good.

It's a broken system that is heavily biased against certain classes of people.

dahdum2• 7 years ago

I think relying on the discretion of a bank manager / individuals is apt to be far more biased and unfair than credit score is. I do agree it's kind of scary how far and wide these scores affect you.

astura9• 7 years ago

Credit activity is a way to see how conscientious someone is. By knowing who is paying back their loans and not running up their credit cards, they know who is conscientious, therefore its useful.

Good landlords want to rent to conscientious people so they pay their rent on time and don't trash the place. Insurance companies want to give discounts to conscientious people because they are less likely to make a claim. Cable companies are lending you hundreds of dollars in equipment and give you a service before you're billed, so they want you to be conscientious enough to take care of their equipment and pay you bill. So they all want to see your credit score and if you have bad credit, then you are denied or you have to pay extra or pay a large deposit.

Because lenders have a quick reliable way to tell who is likely to pay them back and who isn't then they can offer very low interest rates to the good borrowers.

Credit scores are not "arbitrary," they didn't materialize out of nowhere, actuaries spent lots of time making sure that they measure what they are designed to measure, which is a probability that you're going to miss a payment in the next 24 months. The fact its "gameable" is completely irrelevant if it still measures what the lender wants it to measure.

The system prevails simply because it works on a large scale, even though a few individuals are left behind. People who have no credit at all can usually get a mortgage with manual underwriting (according to Dave Ramsey at least).

If they only knew when someone didn't pay their debts rather than knowing when someone both did and didn't pay their debts, then we wouldn't have access to the same sorts of financial products at the same rates.

SilasX5• 7 years ago

That's all true, but it's not addressing the parent's question of why Americans have to artificially "build credit" while Europeans don't. Presumably all that applies in Europe and yet they don't have to jump through the same hoops.

apeace• 7 years ago

I assume that it is just a money-making scheme and serves no actual, logical purpose.

I had bad credit a couple years ago because I'd never had a credit card or a loan. I decided to fix it by getting a card much like this Amazon one. I attached it to my Netflix account, turned on autopay, and forgot all about it.

A few months later my credit score had skyrocketed from the mid 500's to the mid 700's.

Nothing about my income or my job stability changed in those few months. Nothing about my spending habits changed. The only thing that changed was instead of paying $9 to Netflix via my debit card, I paid via my credit card.

But this is an advantageous situation for them because they have multiple avenues to extract money. Miss a payment? Late fee. Don't pay the whole thing? Interest. Don't read every document you get in the mail? Here's a new annual fee.

I'm in a funny situation now because my score is looking pretty good, but all of the score tracking companies tell me the best way to continue improving is by getting more credit cards. How convenient.

Edit: Spelling

cptskippy3• 7 years ago

It is both a money making scheme and it does serve a logical purpose.

You might have phone service for 20 years, pay each month by check, and never miss a payment. That will never show up on your Credit Report. But if you miss one payment, the phone company will gladly report you, regardless of the reason, to credit reporting agencies.

Financial Institutions however do report to credit reporting agencies regularly regardless of whether it's a loan or a credit card.

Having nothing on your credit report isn't necessarily a bad thing, but having a record of making monthly payments is even better. A loan costs money, in the form of interest, but a credit card doesn't necessarily cost you anything. So the theory is that you can acquire a credit card with little or no credit history, and demonstrate your ability to pay off a monthly balance and the credit card company will report that activity.

dahdum2• 7 years ago

You didn't have "bad credit" you just had a thin file. Your score went up quickly because it was all positive indicators. I was in the same boat, never bothered with a credit card or took a car loan (bought used in cash), and my score was 500's. Couple years later and I'm just shy of 800 with 1 card (no annual fee) I barely use and have set for automatic payments through checking account.

cptskippy3• 7 years ago

In my country there are agencies that track, for example, the fact that you had a debt collector called on you

That's pretty much how US credit agencies work.

How does your system differentiate between someone who pays their debts on time and someone who has never had a debt?

In the US, the credit reporting agencies fulfill that role by receiving record of debt repayment from financial institutions.

FireBeyond• 7 years ago

There's more to it than that though. Balances carried, utilization ratios, etc., all manner of metrics that are about how good a credit _consumer_ you are (i.e. profitability), not just credit risk.

justinhj• 7 years ago

Canada has it too.

ScoutOrgo• 7 years ago

It's more data for making better predictions on default. Better predictions = better returns, kinda like the stock market.

prostoalex7• 7 years ago

In exchange US consumers have access to a larger variety of loans. E.g., mortgages that require little to no down payment, car loans at 0% APR.

92543927• 7 years ago

Capitalism. America is addicted to credit. Hook 'em while they are young and financially dependant. You are either a producer or a consumer. The power is with the producers. The market decides on the winning company, until the other companies catch up with competing offers ("the first hit is free!").

Credit card companies make money from transactions and from people going late, but still paying up. You can get them to pay up, by threatening to nuke their credit score (this threat becomes stronger as more producers join in on this Moloch). You can get them to spend more by easing the process and offering cashbacks (which is like offering complementary bread in a restaurant and adding 10% to all prices).

It is not what consumers want, but it is what they "deserve". Producers get rich when middle- and low-class families don't have any money saved up to replace the broken fridge, so they have to rely on even more credit, forever casting them into financial serfdom. Consumers with credit card debt have zero leverage. Consumers who never default/go late, don't care, or turn their craving addiction into support of the system (nobody wants to admit that they, or the people they care about, are getting played a fool).

Removing these bizarre credit building plays, requires a change in law, a huge credit crunch/economy crash, or a cultural change. My money is on the economy crash. However, the entire credit building system proved futile during the home loan crash, so I am not holding my breath. After all, America is still a first-world country where contracting cancer can bankrupt you, while producers keep dumping toxins in the water and get off scot-free. It is ruthless. But you too can prove you are a good consumer, by building up your "social credit" score, starting with your teens.

koala_man• 7 years ago

Lack of socialism, I think.

In Norway, I believe a bank is legally required to offer you a detailed, reasonable rationale if you're denied for a loan. This is to empower the consumer to fix the situation, and to avoid unfair discrimination.

This means that the bank can't reject your loan simply for being your first one, or because some black-box AI said no. Essentially you're considered trustworthy until proven otherwise.

Meanwhile, an American bank can probably tell you to get stuffed for any or no reason, meaning that the onus is on you to prove that giving you a loan is in their best interest: i.e. you have to build credit.

CerebralCerb• 7 years ago

Norwegian who work in finance here. I doubt socialism is the cause. We have different financial regulations here, and I often hear Norwegian regulations are far more friendly to banks than across the pond.

It would surprise me greatly if an American bank was allowed to make arbitrary loan decisions. I am only familiar with the Norwegian financial system, but here it is a given that every single loan application that the bank either approves or rejects can stand up to scrutiny. They frequently have to in the case of collection cases (I.E determine if the bank had sufficient information to determine that a debtor could reasonably be expected to repay the debt they were issued).

jmartrican• 7 years ago

WHo would you rather give a $250k loan to?

a) Person who makes $100k salary and never had a loan taken out in their name.

b) Person who makes $100k and has 10 year history of paying off over $50k in accumulated loans.

esoterica• 7 years ago

You're presenting that as a rhetorical question with an "obvious" answer, but it's not obvious to me at all that the latter person is clearly a lower credit risk. Being financially stable enough that you never need to borrow any money seems like as much a positive indicator of creditworthiness as a history of paying off loans in time.

I think you're bringing very US-centric prejudices to the table. In many countries there is no such thing as a credit score and having no credit history is considered equivalent to having a history of on-time payments. As long as you don't have any delinquent payments you're good. So clearly the financial institutions in these countries agree with my assessment.

maxxxxx• 7 years ago

Personally I would think that person a) generally thinks more about money management but in the end both are probably equal. I would probably only look at defaults.

jjtheblunt• 7 years ago

Why would banks want to trust ...

It might be that the 3-way monopoly lobbied (bribed lawmakers) into legislating their business model as what is required. I'm American and it's very much reviled, and very inadequate. I believe Intuit has been looking at alternative credit scoring though don't recall where I read that.

Ayesh• 7 years ago

Credit score system the Americans apparently have to "build" isn't used elsewhere, as far as I know. But may countries have so sort of tracking and rating system to evaluate applicants for bank loans and credit cards.

In my country, all negative activities are recorded, and can hinder your ability to obtain a loan or a credit card in the future. Banks and lenders can access this data, but not the landlords and the rest as you'd see in America.

msoad• 7 years ago

This is perfect for immigrants who have good income but can't get approved for any credit cards because of lack of history.

igorstellar• 7 years ago

Immigrant here. I've got approved for $10K CC at BofA without any history, just provided a bunch of documentation like proof of income. It's also a good idea to apply for some credit union to loan your vehicle even you can afford buying it for cash.

ohhhwell• 7 years ago

Protip for anyone considering moving to the US. Make sure you open an Amex card in your current country at least 3 months before moving. Amex has a system where as a customer from another region they will let you open one card without needing US credit rating! Make sure you pick a card that doesn't have an annual fee as your first card, since a component of most credit scores is the age of your oldest card, so you want to keep this card open forever, so a fee would suck.

I'm approaching 2 years in the us and this has been quite helpful, however I'm still in the situation someone else mentioned. My credit score is high, but I have gotten rejections from "not long enough history" (chase)

But getting an Amex platinum after the fact was no problem to get in on the whole Airport Lounges US credit card thing.

tareqak2• 7 years ago

AFAIK, if:

1. You have had an account with the Canadian RBC Royal Bank 2. You move to a state in the US where the US RBC Bank operates in

1. You have had an account with the Canadian TD Bank 2. You move to a state in the US where the US TD bank operates in

then, you can ask the US banks to look at your corresponding Canadian bank's credit history in making a decision in approving you for one of the US bank's credit cards (YMMV - your mileage may vary).

milin• 7 years ago

Even if there is a fee, most of the time there is an option to downgrade the card to a no fee version.

mcstafford• 7 years ago

standard variable purchase APR is 28.24%

Amazon has practically brought payday loans to scale.

sl1ck7312• 7 years ago

This seems to be on par with most other store cards, for example a card from Best Buy.

brianwawok2• 7 years ago

Payday loans are often 300-600%. Or at least were in many states before regulation was passed. See here for details state by state:

https://paydayloaninfo.org/state-information

That said, APR of 20%+ on high reward credit cards is not uncommon. I have various cards with various APRs over 20%. I have never paid a penny of interest on them so I don't track which APR is which.. usually the juicier the "reward" of a card, the higher the APR. Which matters not if you fully repay.

bluedino• 7 years ago

History repeating itself...Sears was many peoples first credit cards, they'd give almost anyone a $300 card (which could only be used at their stores)

bongobongo6• 7 years ago

Yep. I'm really confused why this press release/advertisement for Amazon is on the front page of Hacker News. It's not new technology; it's not even close to being innovative. It's literally just an Amazon logo pasted onto an old idea. This is an advertisement.

iscrewyou• 7 years ago

Same here. This belongs on r/personalfinance. Not at the front page of HN. There's nothing techy or ground breaking about this other than being offered by Amazon.

astura9• 7 years ago

HN just likes to have a discussion whenever Amazon offers a new product or service for whatever reason.

Same with Apple or Google.

sdinsn• 7 years ago

This is called a "secured" card. Pretty much all banks offer this.

_bxg1• 7 years ago

The comments here about how bad America's privatized credit system is, make me wonder what it would take to "disrupt" that industry. I guess the hard thing is that it's about having relationships with all these giant institutions, so there's a strong in-group bias.

qntty• 7 years ago

Why do secured credit cards have an interest rate? They're charging you to borrow money from yourself? The cost of maintaining an account should be covered by the processing fees, right?

entropea4• 7 years ago

Nothing more than greed. It's secured, the company will never lose money on it no matter what.

luckydata• 7 years ago

It's backed by Synchrony meaning it will have impossibly shitty management tools, can't speak to a human without spending an hour on the phone. No thanks.

dclaw• 7 years ago

Pretty sure they're breaking the law regarding the 2009 CARD Act. It took a search on that page for % to find the actual APR, which is 28.24% -- That was the 26th result on the page out of 38. The first 25 being provisions regarding their 5% back.

The APR is required to be prominently displayed so consumers can do their due diligence on deciding on a card.

But whatever, obviously Amazon is getting into the slave credit business. Like they care, and like anyone would bother holding them accountable.

BonesJustice• 7 years ago

Yeah, I don't think burying it in the ninth paragraph of the Terms could be reasonably called 'prominent'.

For that matter, the landing page for the Apple Card shoves it into a footnote.

Seems like a case of "tech company trying to act like bank has no idea how to comply with banking regulations".

beshrkayali• 7 years ago

It's highly unlikely that Amazon or Apple "had no idea how to comply with banking regulations".

dragonwriter2• 7 years ago

The landing page is neither an application nor a solicitation under the applicable federal regulations, so isn't covered by the prominent disclosure requirements.

mNovak• 7 years ago

The tech company scarcely ever "acts like a bank" -- they typically partner with a bank, drive users to it, and split the profits.

In this case the bank is Synchrony Bank, which is behind many many 'store cards' (Go over to www.synchrony.com and hover over 'Find Account'. Look at all those partners!)

dev_dull• 7 years ago

But whatever, obviously Amazon is getting into the slave credit business. Like they care, and like anyone would bother holding them accountable.

I hear this kind of argument from the same people who say the government shouldn’t be telling people they can’t do recreational drugs, or who to marry, or what to do with their bodies etc etc — that they can decide for themselves.

... but the same people can’t be trusted with a high interest credit-building card??

CodeMage2• 7 years ago

Are you really failing to make a distinction between individuals and corporations? Or is there something in your argument that I missed?

dgacmu• 7 years ago

The comment to which you replied was complaining about the lack of disclosure. one can be in favor of allowing consumer choice and still be in favor of mandating disclosure of relevant information -- in fact, it's a pretty logical combination. the recreational drug analogue would be requiring your dealer to tell you if they laced your weed with fentanyl. Something your life depends on knowing, in fact.

ceejayoz4• 7 years ago

The APR is very prominently displayed during the application process. Does the CARD Act require it on the landing page specifically?

cm2012• 7 years ago

Nope, looks like they are fine.

mpolichette4• 7 years ago

I agree... why is this a top story on HN? Am I missing anything or is this just: "Amazon offers a credit card w/ no annual fee... like almost every other company"

dsr_• 7 years ago

That's not a credit card. The credit limit is equal to the deposit you make.

DarkStar851• 7 years ago

Sure it's required and they should have to comply, but this is a secured LoC, so there's no interest to gather in the first place. Unless I'm grossly misunderstanding this? That's a stupid high APR, but you should effectively have a bill of $0.

aeternus2• 7 years ago

It really is the greatest business plan ever though. They figured out how to loan money at 28% APR without actually having to loan out any money.

Very impressive.

astura9• 7 years ago

Secured cards work exactly like non-secured cards, the only difference is the bank holds onto collateral, usually equal to your credit line. You still have a bill to pay, minimum payment, due date, you can pay the minimum and carry a balance, rack up late fees, etc.

The collateral is only returned to you when you close your account or upgrade it to a non-secured card. You don't use the collateral for the monthly bills, just like if you rent an apartment you don't use the security deposit to pay the monthly rent.

paulcole• 7 years ago

Can you show me where in the text of the CARD Act it must be displayed on the landing page? From my reading:

[the APR must] be placed in a conspicuous and prominent location on the billing statement

https://www.ftc.gov/sites/default/files/documents/statutes/c...

dragonwriter2• 7 years ago

The APR is required to be prominently displayed so consumers can do their due diligence on deciding on a card.

On applications or solicitations (the latter being restricted to firm, no-application offers, not advertising for applications.)

javert4• 7 years ago

But whatever, obviously Amazon is getting into the slave credit business

This is the age-old "moneylending is evil" trope.

Are you sure it is evil, though? I don't think so.

behringer• 7 years ago

Is it Amazon? Yep. Then it's probably not very nice.

webninja• 7 years ago

They should display the APR but this is still better than the alternatives. I tried out SelfLender to build a credit score with a $500 secured loan because I had a thin file. I paid about $550 for this loan and I didn’t receive back my principal afterwards. (They illegally kept all $550 and kept claiming they sent me a $500 check.)

christefano• 7 years ago

Looks like Amazon has figured out where to find even more Amazon.com customers by helping improve otherwise risky consumers' credit. Even applying gives $10 — in the form of an Amazon gift card.

tareqak2• 7 years ago

Here is an article with the same story from a different source: https://www.marketwatch.com/story/amazons-new-credit-card-ta... .

neilv• 7 years ago

Does this tie in with recent news about local pushback against cash-free businesses, on social-justice grounds? (Amazon cash-free stores not accessible to poor people without credit cards.)

soulnothing• 7 years ago

I just finished a bankruptcy a month ago. Before a tenant fiasco my credit score was ~800. Now that I've gone through the process I'm at ~630. It's not that bad.

But when I went to look for an apartment in NYC. I was constantly denied due to the bankruptcy on my record. I felt the solution they offered was downright predatory. Either a for paid guarantor. Which took 3 months rent as a non refundable collateral, then an additional 3 months as buffer for failed rent. That was on top of most land lords wanting 6 to 8 months rent for down payment. Another service I saw was a guarantor insurance plan. Which tacked an extra ~8% as an insurance fee for the first year, than 5% the next year.

The only reason I care about my score right now. Is related to putting a roof over my head. Due to the above I went down to Philly and only had to put up four months instead of the typical three.

To rebuild my credit I had two secured cards. One for monthly services, the other for larger purchases. I paid them down to 10% each month. This is what brought my score to around 630ish range.

Since being discharged. I have been receiving offers that feel predatory to me. House loans with a consultation fee. Or auto loans with really high APR. I've also received a number of credit rebuilding loan offers. Which have non-refundable application fees ranging from 75$-100% with a variable APR between 24-32%.

I'm blessed to be a well paid software employee. Because once you're on the other side of the fence. No one trusts you, and the fine print is much more aggressive. I really feel now for people who are barely scraping by. Having to sign these agreements just to cover a roof.

I will look at this just to rebuild my score. It may not be the best. The only other company that approved me was Dell.

We do need a better program to help people recover. Without penalizing them with higher APR or hidden fees. If they got into that perilous position. They may not be on the best footing.

Amazon.com Credit Builder: Build credit with no annual fee

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