Amazon rolls out secured credit card for people with bad credit

[Gil Bang 26000]

It's a "secured" credit card.  For anybody that doesn't really know what that means,  it's a credit card where your credit limit is offset by a cash deposit that you make.

So, open the account, give them say $500, and they give you a credit card with a $500 credit limit.  It then works just like a normal card.  Use it, make the payments, etc.   They report to credit agencies, so it's a great way to build or repair credit.  I've advised a lot of young people to use this type of thing to build credit. 

 

The credit limit matches the amount of the deposit, so the card issuer never has any risk. So, here's the question:  WHY THE FUCK ARE THEY CHARGING OVER 28% INTEREST? 

 

 

[SwanderedTalent 5761]

4 minutes ago, Gil Bang said:

WHY THE FUCK ARE THEY CHARGING OVER 28% INTEREST? 

because Amazon's not doing it out of the goodness of its collective corporate heart?

[Lhorn 4949]

Lol. That’s a good question.  Seems excessive considering their risk is limited. 

[SimonBolivar 10959]

Just for comparison we do secured loans at a flat 4.45% regardless of credit on savings accounts and 2.25% over rate on CD's. We also report to a credit bureau...so yeah 28% is high.

[Gil Bang 26000]

forgot the link

https://www.cnbc.com/2019/06/10/amazon-launches-a-credit-card-for-the-underbanked-with-bad-credit.html

[Gil Bang 26000]

2 minutes ago, SimonBolivar said:

Just for comparison we do secured loans at a flat 4.45% regardless of credit on savings accounts and 2.25% over rate on CD's. We also report to a credit bureau...so yeah 28% is high.

There you go.  Cover your administrative costs, and make a little money.  And probably end up with a loyal customer. 

[Huckleberry 33083]

28% interest on what? If the cardholder already had the money in the bank and it's really just a debit card then exactly what in the fuck are they charging interest on?

[Gil Bang 26000]

any balance carried.  Once the deposit is made, it's forgotten about and the card is treated like a normal credit card.

 

And it's not treated like a debit card, as the deposit isn't reduced unless the customer defaults.  Then there's some mechanism to seize the deposit. 

Edited June 12, 2019 by Gil Bang

[BearSchlong 8110]

Looks like Amazon has exhausted the pool of credit worthy candidates for their Synchrony bank store card, and the Chase Bank Amazon Visa.

[TwiceHorn 31534]

I suppose like any secured loan, the security is not automatically applied to an overdue balance, some foreclosure type procedure is required.  In the meantime, the balance accrues absurd, N. Dak. style  CC interest.  Or S. Dak.

[TwiceHorn 31534]

1 minute ago, Gil Bang said:

any balance carried.  Once the deposit is made, it's forgotten about and the card is treated like a normal credit card.

 

And it's not treated like a debit card, as the deposit isn't reduced unless the customer defaults.  Then there's some mechanism to seize the deposit. 

Yep.  So if doofus doesn't pay a $200 balance, Amazon can quickly take the full $500.

[936horn 919]

Obligatory "it's expensive to be poor"

[XYZ 2154]

22 minutes ago, Gil Bang said:

WHY THE FUCK ARE THEY CHARGING OVER 28% INTEREST?

Because what’s best for Amazon is best for America.

[SDG 3319]

3 minutes ago, 936horn said:

Obligatory "it's expensive to be poor"

No; it’s expensive to have bad credit. Lots of “poor” people don’t have bad credit. 

[BearSchlong 8110]

Dave Ramsey calls the FICO score the "I Love Debt" score.

My grandfather-in-law doesn't even have a credit score. Pays cash for everything.

[Gil Bang 26000]

And lots of people that don't have "good" credit don't have bad credit. 

Lots of people just don't have much of a credit history at all. 

[Gil Bang 26000]

2 minutes ago, BearSchlong said:

Dave Ramsey calls the FICO score the "I Love Debt" score.

My grandfather-in-law doesn't even have a credit score. Pays cash for everything.

Uhhh.  So, if I run his credit, there's no score?  Color me doubtful.   I'm guessing he's got a score, a very low one.  I've dealt with young folks that have no real credit history, but they've all had scores. 

I'd love to be wrong though.  Having no score at all would be cool. 

Edited June 12, 2019 by Gil Bang

[CDAK 216]

It wouldn't surprise me if Amazon loses money on the credit card, even with high interest rate.  If a decent percet of cardholders use the card only at Amazon, Amazon is taking a loss on every purchase.  The swipe fees are dwarfed by the 5% cash back.  The card could encourage cardholder to increase their overall spend at Amazon, however.  So maybe they view the card as a loss leader.

[936horn 919]

nm34

Edited June 12, 2019 by 936horn

[Huckleberry 33083]

22 minutes ago, Gil Bang said:

any balance carried.  Once the deposit is made, it's forgotten about and the card is treated like a normal credit card.

 

And it's not treated like a debit card, as the deposit isn't reduced unless the customer defaults.  Then there's some mechanism to seize the deposit. 

Okay, so Amazon is targeting credit poor people and giving them the chance to give Amazon $500 for the right to be charged 28% interest?

Sounds awesome.

[BearSchlong 8110]

8 minutes ago, Gil Bang said:

Uhhh.  So, if I run his credit, there's no score?  Color me doubtful.   I'm guessing he's got a score, a very low one.  I've dealt with young folks that have no real credit history, but they've all had scores. 

I'd love to be wrong though.  Having no score at all would be cool. 

I just assumed that if a person has never applied for credit, nor ever had a payment reported to an agency, that they simply had no credit score.  I'm probably wrong.

[SimonBolivar 10959]

18 minutes ago, Gil Bang said:

Uhhh.  So, if I run his credit, there's no score?  Color me doubtful.   I'm guessing he's got a score, a very low one.  I've dealt with young folks that have no real credit history, but they've all had scores. 

I'd love to be wrong though.  Having no score at all would be cool. 

Nope, a lot of people have a N/A score because it's been so long since they've had any debt. It's tough when they come in for a car loan and we have nowhere to really place their rate without a co-borrower.

Edited June 12, 2019 by SimonBolivar

[Gil Bang 26000]

Just now, SimonBolivar said:

Nope, a lot of people have a N/A score because it's been so long since they've had any debt. It's tough when they come in for a car loan and we have no where to really place their rate without a co-borrower.

Well there's the answer.  Thanks. 

[SimonBolivar 10959]

2 minutes ago, Gil Bang said:

Well there's the answer.  Thanks. 

That at least goes for Experian. I have less interaction with the other two. You'll have people with pretty extensive credit histories that show up in the credit report without a score because they've had everything paid off for a few years and no credit cards in their name. 

[Chilly Water 416]

They’re probably earning interest on the security deposit in addition to charging exorbitant rates for balances carried over

[Gil Bang 26000]

Of course they are.  

[Cheeseweasel 26438]

1 hour ago, XYZ said:

Because what’s best for Amazon is best for America.

Bezos'd!

[Pato del Muerto 52583]

1 hour ago, Gil Bang said:

Uhhh.  So, if I run his credit, there's no score?  Color me doubtful.   I'm guessing he's got a score, a very low one.  I've dealt with young folks that have no real credit history, but they've all had scores. 

I'd love to be wrong though.  Having no score at all would be cool. 

You can absolutely be a ghost. 

Plenty of banks offer secured credit cards like this, Walmart too I think, and i bet they are at similar rates because the credit line is usually only $1-500 dollars so you can’t make enough money at a low interest rate. 

I bet they end up making more money off of late payment penalties than interest as those flat $35 fees add up in a hurry and could end up consuming the rest of the balance and cause default and then the company takes your deposit and all you paid for was one grocery run and several late fees, and now have even shittier credit to show for it.

 

Edited June 12, 2019 by Pato del Muerto

[TornACL 7722]

[rocko20]

If you're going to post and tell us about this card, why not include the link where we can apply?

[/rocko20]

['stache 21858]

It sounds like the plan is to repair credit. The interest rate is incentive to pay timely. My guess is Amazon has no intent of pursuing collection of anything over the deposit.