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Does the Amazon Credit Card Build Credit? The Straight Dope

Yes, the Amazon credit card, like most credit cards, can indeed help you build credit. However, the keyword here is can. Building credit isn’t automatic. It depends entirely on how you manage the card. Used responsibly, it’s a powerful tool. Mismanaged, it can do more harm than good. Let’s dive into the nitty-gritty.

Understanding the Credit Building Mechanism

The fundamental principle behind any credit card’s ability to build credit rests on reporting your payment behavior to the three major credit bureaus: Equifax, Experian, and TransUnion. When you open an Amazon credit card and use it, the issuer (usually Chase or Synchrony Bank, depending on the specific card) regularly sends information to these bureaus about your:

Payment history: Were your payments on time? Did you pay the minimum, the full balance, or somewhere in between? This is the most important factor in your credit score.
Credit utilization: How much of your available credit are you using? Ideally, you want to keep this below 30%, and even better, below 10%.
Account age: How long have you had the account open? A longer credit history generally translates to a better credit score.
Credit mix: Do you have a variety of credit accounts (credit cards, loans, etc.)? While not as impactful as payment history, a diverse credit mix can be beneficial.
New credit: How often are you applying for new credit? Too many applications in a short period can lower your score.

If you make timely payments, keep your credit utilization low, and generally manage the account responsibly, the positive reports sent to the credit bureaus will gradually improve your credit score over time. Conversely, late payments, high utilization, and other negative actions will damage your credit.

The Specific Advantages of Using an Amazon Credit Card for Credit Building

While any credit card, properly managed, can build credit, the Amazon credit card offers some specific advantages:

Accessibility: Depending on the specific Amazon card, some are more accessible to individuals with fair or average credit scores. This can be a crucial starting point for those trying to build or rebuild their credit.
Rewards: Earning rewards on purchases you would make anyway incentivizes responsible spending. If you’re disciplined enough to pay off the balance each month, you essentially get free money (or points) while building credit.
Convenience: Many people already shop on Amazon regularly. Using the Amazon card for these purchases can be a seamless way to incorporate credit building into your daily life.
Credit Limit Increases: Over time, with responsible use, the credit card issuer may increase your credit limit. This can improve your credit utilization ratio, further boosting your credit score.

The Potential Pitfalls to Avoid

Despite the advantages, there are potential pitfalls to be aware of:

High APR: Amazon credit cards, like many rewards cards, often have relatively high APRs (Annual Percentage Rates). If you carry a balance, the interest charges can quickly negate any rewards you earn and make it difficult to pay down the debt, hindering your credit building efforts.
Temptation to Overspend: The ease of shopping on Amazon can lead to overspending and accumulating debt, especially if you’re not carefully tracking your purchases. This can lead to high credit utilization and difficulty making payments.
Minimum Payments Only: Only paying the minimum payment each month can keep you in debt for a long time and can cost you heavily in interest. Focus on paying the balance in full if at all possible.

Frequently Asked Questions (FAQs) About Amazon Credit Cards and Credit Building

Here are some frequently asked questions to provide further clarity:

1. What Credit Score is Needed to Get an Amazon Credit Card?

The credit score needed to get an Amazon credit card varies depending on the specific card. Typically, the Amazon Prime Rewards Visa Signature Card requires a good to excellent credit score (670+). However, the Amazon Store Card might be accessible with a fair credit score (620+). Check the specific requirements for the card you are interested in.

2. How Quickly Can I Build Credit with an Amazon Credit Card?

There’s no guaranteed timeline. Consistent on-time payments are key. You might see some improvement in your credit score within a few months, but significant improvements usually take 6-12 months of responsible credit card usage.

3. Does Applying for an Amazon Credit Card Hurt My Credit Score?

Yes, applying for any credit card results in a hard inquiry on your credit report, which can slightly lower your credit score temporarily. However, the impact is usually minimal, and the potential benefits of building credit often outweigh the temporary dip.

4. What Happens If I Miss a Payment on My Amazon Credit Card?

Missing a payment can significantly hurt your credit score. Late payments are reported to the credit bureaus, and they can stay on your credit report for up to seven years. Contact the card issuer immediately and try to make the payment as soon as possible.

5. Can I Build Credit with an Amazon Credit Card if I Already Have Other Credit Cards?

Yes, you can. However, it’s important to manage all your credit accounts responsibly. Opening too many credit cards at once can negatively impact your credit score.

6. What is the Difference Between the Amazon Prime Rewards Visa Signature Card and the Amazon Store Card?

The Amazon Prime Rewards Visa Signature Card can be used anywhere Visa is accepted and offers higher rewards for Amazon and Whole Foods purchases. The Amazon Store Card can only be used on Amazon and offers promotional financing options. The Prime Rewards card typically requires a better credit score.

7. How Can I Check My Credit Score?

You can check your credit score for free through various websites and apps, such as Credit Karma, Credit Sesame, or AnnualCreditReport.com. Many credit card issuers also offer free credit score monitoring.

8. What is the Best Way to Use an Amazon Credit Card to Build Credit?

The best way is to use the card for small, regular purchases, and then pay off the balance in full each month before the due date. Keep your credit utilization low, and avoid accumulating debt.

9. Can I Use an Amazon Gift Card to Pay My Amazon Credit Card Bill?

No, you generally cannot use an Amazon gift card to pay your Amazon credit card bill. Payment must be made through approved methods, such as online bank transfer, check, or money order.

10. Does Closing My Amazon Credit Card Hurt My Credit Score?

Closing a credit card can negatively impact your credit score, especially if it’s one of your oldest accounts or if it significantly reduces your overall available credit. Consider the implications carefully before closing any credit card account.

11. What Are the Alternatives to an Amazon Credit Card for Building Credit?

Alternatives include secured credit cards, credit-builder loans, and becoming an authorized user on someone else’s credit card account. These options can be particularly helpful if you have limited or no credit history.

12. Is It Worth Getting an Amazon Credit Card Just to Build Credit?

If you already shop on Amazon and can manage the card responsibly, it can be a convenient way to build credit while earning rewards. However, if you’re prone to overspending or carrying a balance, there may be better options for building credit without the temptation of online shopping. Assess your spending habits and financial discipline before applying.

Conclusion

The Amazon credit card can be a valuable tool for building credit, but it’s not a magic bullet. Responsible management is paramount. If you can commit to making timely payments, keeping your credit utilization low, and avoiding unnecessary debt, the Amazon credit card can help you achieve your credit-building goals while enjoying the benefits of Amazon’s rewards program. But if you’re not careful, it can just as easily set you back. The power, as always, is in your hands.