Amazon secured card move throws spotlight on controversial niche

Secured credit cards backed by a consumer's own deposits have been a small element of the consumer lending business, though interest has grown in recent years. Now that Synchrony and Amazon have unveiled a major secured card expansion of the ecommerce site's Store Card, will more banks and credit unions seek a piece of this territory?

When Amazon and Synchrony Bank introduced a secured credit card offering called Amazon Credit Builder, Margaret Keane, CEO of the bank, portrayed the product as an assistance to lower-income consumers who wanted to shop on the ecommerce site while establishing or rebuilding credit.

Shopping online is easier with a credit card, Keane said, and for lower-income consumers with poor credit, having a secured card represents a way to have credit to do so. Secured cards entail the consumer making a deposit with the creditor, the deposit becoming the credit limit on the card. Unlike a prepaid card, loaded with the consumer’s own cash, the security deposit serves as collateral and the transactions are treated as credit. Pay it back, the theory goes, and you eventually demonstrate creditworthiness and graduate to unsecured credit cards. In a sense it’s an update on the old passbook loan concept.

Keane also said that lower-income consumers could be working multiple jobs, and have little time for traditional shopping, making the convenience of 24/7 ecommerce invaluable to them through the secured card. The card is available both as a baseline Amazon store card and as an Amazon Prime card, which features discounts and cashback benefits.

 

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