Amazon.com Credit Builder: Build credit with no annual fee
amazon.com
amazon.com
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.
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".
Get fined Z dollars for breaking a regulation.
If Y > Z, congratulate those responsible.
Legally Signup n customers and make W dollars.
It should meet Y-W > Z
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!)
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??
However, there's still the fact that @dev_dull is not distinguishing between people arguing about government restricting individual freedoms and government regulating corporations. It's not about whether people can be trusted with high interest cards, it's about whether corporations should be allowed to set any interest rate they want.
In some cases, this adjustment would necessitate increasing the rights of individuals.
He is commenting on the high interest issue. So your criticism is misplaced and unfair.
As has been covered elsewhere in the thread, the disclosure complaint is based on an apparent misreading of the law.
It's exactly like requiring a security deposit on an apartment. You still have to pay rent every month, but the landlord holds onto some money in case you stop paying rent. In this case the lender holds onto some money in case you stop making payments.
You still have bills, you still must make payments on time, you still have the option of only making minimum payments and carrying a balance. The collateral you deposit is only returned when you close the account or the account is upgraded to a non-secured card.
The 2nd to last paragraph in that section starts with: "Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available."
My first credit card was a secured VISA card and it had a high interest APR of 21%. The high interest rate was irrelevant to me. What was most important was that I had a credit card at all. When I got the card, I remembered the first thing I did was order music CDs from the web. This level of convenience wasn't possible by mailing in money orders. Since I paid off the full balance every month, whatever high interest rate the card had didn't affect me.
It feels more like an ad than news.
Very impressive.
1. You give a business some of your money.
2. Business gives you some of it back.
3. Business charges you insanely high interest on the amount they gave you back, until you return your money back to them.
4. Profit. So much profit.
The only reason someone would apply for one is to build credit, and missing the grace period while subjecting oneself to high APR is pretty much the worst thing one can do at that point. It's worse than not getting the card at all.
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.
> [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...
On applications or solicitations (the latter being restricted to firm, no-application offers, not advertising for applications.)
This is the age-old "moneylending is evil" trope.
Are you sure it is evil, though? I don't think so.
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?
Firstly, opening a bank account almost never requires a credit check. Think about it: what risk is the bank taking on by giving you an account with nothing in it?
Secondly, renting an apartment typically involves a credit check in my experience. I had my father co-sign my first lease to avoid the security deposit (~$1000, 1 month of rent). There is also a separate renter's score (?) that evaluates how "good" of a renter you are in general.
I think no history you are fine to open a bank. But I think if you have bad credit history (like previously bounced checks), you won't get approval for a checking account - or get a very limited account.
> 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.
Most middle class and up people don't have to do this song and dance. Parents can add you as an authorized user on one of their cards, and you could build up a great score and a fat credit limit just in time for you to max it out during spring break in college.
Seems like a win win to ne.
But you need to pay $300 for this line of credit! What's the point then?
Not at all.
1) no one knows I inherited that money unless I tell them (ok, the bank and the IRS do - the bank can't announce it, the IRS doesn't announce it...)
2) my instant change in net worth does not affect my ability to handle my finances month-to-month
idk man, if I inherited 1M USD, it would definitely affect my ability to handle my 3K USD monthly expense.
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.
A surprisingly high number of people are unable of handing these basic tasks.
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...
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.
However, although some will overspend, it's mostly a positive that home ownership isn't limited to the wealthy (and even the moderately wealthy may not have sufficient cash on hand in high CoL areas). Furthermore, even those young people with great jobs probably need to borrow for purchases like cars.
So I don't think people should overextend themselves but I don't have a problem with people using debt sensibly as a tool.
I think it's fine as long as it's always kept within reason.
If I have a disposable income of $500/month, and I want a $1,500 TV, I might just put that on the credit card. If I have a 20% APR on my card and pay it off in three months, I only pay a little over $50 in interest (Note for someone else that decides to check the math: Remember that many cards have a 30-day grace period on purchases before they start collecting interest). I might think it's worth it to pay an extra $50 to get that $1,500 TV now rather than 3 months from now. Maybe it's actually a $2,500 TV and it's on sale for this week only. Better yet, maybe the store is offering 0% financing for 12/18/x months, which is far longer than it'll take me to pay it off anyways.
Of course, the "within reason" part is what kills people. If my disposable income is under $100/month, then purchasing a $1,500 TV on credit is probably a bad idea. Heck, even saving for a $1,500 TV is probably a bad idea.
Why don't you take it from the pile of money you are sitting on? And if you don't sit on a pile of money, should a new TV really be what you are worrying about?
Absolutely, if the person wants to direct their resources toward a new TV. Generally speaking, people should spend their money on whatever they want to. The inherently subjective matter of what to do with one's life and time is properly entirely up to the person in question.
I don't object to _all_ debt. Yes, I took out a loan to buy a home and pay for my education. But the former made more financial sense for me than renting, and the latter is paid off and a big reason why I have the income to afford a home in the first place.
It's problematic how normalized holding credit card debt is in the US (at least, it is more so normalized than elsewhere in the world).
The problem is that the credit system was not designed for society, it came out of a business need. In reality, you don't need a good (or any) credit score if you don't need a loan... but if you do need a loan, the person giving a loan wants to know if you're likely to pay them back.
The credit agencies decided they were scummy enough to collect as much personal info as they could, and sell it to those companies so they could asses that risk... When you get a full credit report, its actually data about you and your accounts, the score is just the distilled version of that data to make it "easier".
Finally, credit score is not always the last straw, depending on what kind of business you're working with. Many smaller companies might be willing to work with you regardless of your credit score, however, they might adjust the terms of the deal...
I think in general it’s a matter of philosophy: so you think that loans are there to serve society (mortgage is a good example of a “necessary” loan), just like banks have a function to society.
I personally can see both sides of the argument, but am I really not feeling like I’m missing out on something without it. Just checking your current financial status rather than historical seems sufficient to me.
People are buying and selling at huge values, and maybe winning a little here and there on upswings in the market, but the banks win either way with their steady monthly payments.
The Netherlands has the Bureau Krediet Registratie, which is pretty similar to the credit ratings in the US. (Arguably, the credit rating system in the US is slightly more forgiving than the BKR, but that's a separate matter - the Netherlands definitely does have this system).
France is actually the outlier for not having one - Germany and Spain both do, for example, as does the UK. And of course Canada, the US, and Australia have similar systems as well.
This is how credit ratings in the US work as well.
I was effectively required to get a secured credit card to demonstrate my "ability" to repay "debt". After doing this for some time, I was able to get a normal credit card, with a far higher limit and no security.
It's a little farcical really, that my ability to pay back a few hundred dollars monthly granted me access to a credit line far in excess of my monthly income.
Yes, that's not because you had a bad credit score, but because lenders in the US are more conservative and are generally unwilling to lend money to a person who doesn't have a good credit score. This applies especially to people who aren't citizens, even if they have legal residence and work authorization. You didn't have a good credit score - or any score at all. That doesn't mean you had a bad rating. If you'd had a bad score, it would have been much worse that what you describe.
The original statement was that "if you have never taken any loans, you will never have a bad rating". This is true in both the Netherlands and the US (barring cases of fraud and identity theft, which occur in both countries).
Not really. Credit fosters growth. It's creating money out of thin air. It allows me to exchange rapid growth right now for interest payments later. If I'm young and want to buy a house, the time advantage of buying now versus buying when I have $100,000 saved in the bank far outweighs the fees and interest payments over time. Same goes for the utility value of a car or the ability to spend on a credit card for expenses incurred to go after a new career opportunity. So long as you have things planned out, credit is a very very good thing.
Yes, it makes sense to take on debt if you want to buy a house and you have a steady paycheck.
However, it's not obvious that it makes sense to take on debt to pay for things you already have money in the bank to afford. Why do I borrow $100 to buy groceries every week? I have more than $100 in my bank account at any given moment. Why do I borrow $3.50 to buy a coffee at Starbucks? I'm constantly borrowing money that I don't need, and then paying it back within a few weeks, just so that I can prove that I'm a responsible debtor.
This really becomes a problem when people use credit to pay for things they can't afford, of course. Still, the whole system of taking on debt for every minor purchase, just to prove that you'll pay it back, is sort of absurd.
I do it because I get a 1-3% rebate on all my purchases. That's free money for me.
Before I had a credit card that gave me a rebate, I bought everything with a debit card. I still had a credit card, but it was only for emergencies.
> Still, the whole system of taking on debt for every minor purchase, just to prove that you'll pay it back, is sort of absurd.
You don't really need to use the credit card to establish credit history. Simply having one is enough. A lot of people believe that to maximize the boost to your credit score, you shouldn't completely pay off the card, and instead carry a small balance every month, but that's a myth.
While it makes sense for the individual, high fees should be regulated.
I don't know if it's the same in the US, but in Canada, the price can't be affected by the way you pay for it. That push some places to refuse cards.
That means that customers who doesn't use credit cards, pay for my rewards too.
In your mind it's a 1-3% rebate, but in actuality you're paying for it anyway due to merchant fees, etc.
If we're going to question the overall system, then not having credit cards would likely mean savings for pretty much everything you would buy today that uses a credit card as a facilitation of payment.
Most US businesses don't bother with offering discounts for cash/debit payments, so it's not like cash-only lifestyle will generate dramatic savings.
If (a) everyone who owned a credit card actually had the means to pay for the good/service with available cash (even if not literally in their pocket) then (b) credit cards wouldn't be necessary and thus (c) good/services that typically use credit cards would be ~1-3% cheaper. In other words, the people who are getting rebates are artificially getting them b/c if credit cards didn't exist, all goods/services would be cheaper.
* someone needs to drive to the bank to ensure the register has enough pennies, quarters, and dollar bills to make proper change in the morning
* a system needs to be developed to prevent employees from stealing cash
* to avoid being a crime target, there needs to be a way to safely store larger amounts of cash
* there's a cost of an occasional fake bill being accepted by an employee
* someone needs to drive to the bank to deposit the day's earnings into the bank account
It's not like the US has zero businesses that deal exclusively in cash, so there should be success stories of disruptive startups going against the establishment by foregoing merchant fees and passing the savings on to consumers.
But outside of Arco am/pm gas station, I struggle to find a good example where a cash-only business, or chain, or a sector would offer consistently lower prices than their credit-card-accepting counterparts.
Having just disputed a merchant transaction last week, I have one reason - to introduce an additional layer of consumer protection at no additional cost to the consumer. If I had transacted in cash, I would've been screwed. And this was a major nationwide retail chain, not a dude in the alley peddling stuff that "fell off the truck".
Merchant fees are very high.
> If I had transacted in cash
The only difference with a debit card is a function of regulation and the network rather than actually being a credit or debit card.
But there were no discounts offered for paying cash.
This is exactly it. People who use credit to pay for things they can't afford are a risk, but how do you identify those people efficiently? Seems logical to test for that by starting with low credit limits rather than immediately offering loans for items of high value like a car or house.
The consumer gets a free 30-day loan and the issuing banks (via credit agencies) get valuable data.
Getting a credit card and spending up to the limit while only making the minimum payments is bad debt. Buying a luxury car that's more expensive than you can really afford because the car dealer talked you into it is bad debt.
On the other hand, if you need a car to get to work, getting a car loan for a practical car is probably good debt. If you're married and about to have your second child and need a house, a mortgage is probably good debt because you're building equity, the house might appreciate, and anyway the alternative is throwing away a similar amount on rent.
Point being, it is probably not best to always seek to minimize debt. There are trade-offs to consider. Often, avoiding debt is better, but sometimes the negatives of debt are more than outweighed by some opportunity it unlocks.
So is it bad for society? It depends on how much bad debt it encourages and how much good debt it encourages.
A credit check serves as a proxy for someone who cares about their future reputation and hence is less likely to cause damage to an apartment, and if they do, then they will pay for it. Similar reasoning applies to other rental businesses such as hotels, cars, tools, equipment, etc.
Well to be fair, offering the full term rent up front to avoid a credit check seems sketchy as hell. Did you still let him do a credit check? He could have use this to verify your identity. I know a virtual bank in Canada that use them for that (if you refuse, they simply ask you to go do an identity check in a Canada Post).
Live nowhere?
Because if you won't pass the credit check for one property agency, you won't pass for any of them.
I've been in that situation. I had to pay 14 months rent up front. Crazy thing is I had the money and could pay it fine, but I couldn't pass a credit check to pay exactly the same amount monthly.
Actually the crazier thing is they required 12 months rent up front again, for the second year. You'd think by then I'd have a track record of paying rent.
All because paying rent for many years does not count towards credit rating, even though it's highly regular and the single largest outgoing for most people. (Paying mortgage does count. Annoying.)
Sure I agree that paying rent should count towards credit rating, but that's not an argument against credit rating.
A bad credit rating means that it's a bad idea giving you a unsecured loan... that's all. An apartment is sadly pretty close to a loan, even more so with all the renter protection you get out of it.
Paying the full rent in theses cases make sense then.
My point is that in the lostphilosopher case, it was maybe simply used as an identity check, making sure it wasn't from a criminal. The resulting credit score wouldn't matter because of the full rent.
> You'd think by then I'd have a track record of paying rent.
Well, if they feel safer that way, again make sense. Why won't you personally give me a loan? The same apply to that case.
A place to live is also a basic life necessity.
Something is very wrong in a society where a "bad credit rating", which can arise from many things (some of them having nothing to do with credit - agency malpractice comes to mind), threatens homelessness _even when you can afford to rent_.
Building credit means you could put yourself thousands of dollars in debt... but you don't. 90% of building credit is demonstrating restraint NOT to use credit dangled in front of you. In the rare instance where you take advantage of the ability to use more credit than usual, you pay it off within a reasonable amount of time. The credit industry is predatory, to be sure. But that's only for the idiots who believe they're "able to" or "expected to" use all the credit afforded to them. It's about seeing all that possible "green" in front of you and NOT using it, or using it sparingly and responsibly.
>> Some of us would prefer not to utilize debt at all
So don't. Build your credit by buying groceries on a credit card, and paying it off every month. You're not really going into debt; you're just postponing paying your groceries by a week or two. You can build a near-perfect credit score without ever paying a single cent of interest.
No, I'm saying I don't want to have anything to "pay back" to anyone. _You_ are free to live differently, I just want the option to complete my transaction at the time and move on. Yes, paying back debts on time prevents bad outcomes, but so does not taking on the debt in the first place. And objectively it's a much more rock solid way of making sure your finances don't get out of whack. I've never met anyone who says "I'm bad with debt," but yet many American's have suffered bad consequences from debt.
> you funnel/proxy money you already have through a creditor
A service I don't want, get no value from, and increases the cost of the goods I consume because they aren't offering it for free.
> Building credit means you could put yourself thousands of dollars in debt... but you don't.
Not quite, you could actually be carrying debt you aren't able to pay back, but are able to make payments on. In fact - it's in the credit industry's best interest for you take out lots of loans that you _can't pay back_ but _can_ make payments on because the (often massive) interest is the money maker. Soon you'll have paid more in payments than you were actually lent. This has gotten so bad the government has had to get involved multiple times. I'm worried that credit scores are tools to create that situation, because of this alignment (think it about like this - are you the customer/priority? or is it the lenders?). Sort of like casinos wanting you to think you're "up" or close to a big score when in reality you're in the red. (And don't get me started on the opaqueness of the systems, lack of recourse for errors, and oh yeah - the security negligence that leads to large scale losses of sensitive data...)
> "You're not _really_ going into debt;"
Aw come on, if you have to put "really" in italics you already know I'm not gonna buy it. :-)
I get that I can have a good credit score, I get that lots of people don't mind having one. To each their own. I'm just annoyed that I can't opt out. That "not having a credit score" is increasingly not a choice I can make, nor can my children.
It's more nuanced than that. It encourages people to get a line of credit and demonstrate that they can be responsible with it. There's no need to actually be in debt, and this doesn't help your credit score.
In the UK, I can build an excellent credit history by having credit cards, but paying them off within the month, incurring no interest whatsoever.
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.
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.
https://www.fool.com/the-ascent/credit-cards/articles/the-av...
https://www.usatoday.com/story/money/cars/2019/03/01/care-pa...
Wow. That’s insane for an average.
What would be interesting is median and mean average of interest accruing credit card debt.
1. https://www.nerdwallet.com/blog/average-credit-card-debt-hou...
I guess I should add to my original comment that not only are median and mean of interest accruing debt relevant, but what portion of credit card users even have an interest accruing balance.
https://www.creditcards.com/credit-card-news/credit-card-deb...
There's some attempt to compare those who carry a balance vs those who pay in full:
https://www.creditcards.com/credit-card-news/average-credit-...
Takeaway is that those who carry a balance and presumably accrue interest tend to have a higher balance.
Your last sentence is what I suspect, that many people don’t pay interest, but those who do might be outliers and have a decent debt burden. The type of person that is okay paying credit card interest rates is probably not going to stop at a few dollars of spending and say it’s enough.
But I can’t say anything for sure without data.
About 38% of US households carry a credit card balance [1], as about 75% of consumers own 1 or more credit cards [2], that puts the number who carry a balance at around 50%.
[1] https://www.creditcards.com/credit-card-news/credit-card-deb...
[2] https://www.creditcards.com/credit-card-news/ownership-stati...
https://www.bloomberg.com/news/articles/2019-03-26/canadians...
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.
Just wanted to throw that out there...
In Belgium for example all houses bought/built are financed via a loan, which in turn is promoted by the government in the form of a tax deduction. Not getting a loan for a house (even when you have the money available) is simple a bad choice here.
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.
If you defaulted on a loan payment before, and it was sent to a collection agency, that's tracked. But that's it.
edit: also, at one point my credit report in Sweden actually DID show my credit card utilization. Never seen it since so maybe the regulations around it got tighter? Example: https://i.imgur.com/NGi86DJ.png
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.
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.
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.
A good example is "financiele curatele"[0]. This is a system where people (usually after either massive debt isssues or other issues which result in "mentorschap"[0]) lose their right to make their own financial decisions, and a curator handles the finances for said person until either the debt is repayed or indefinitely (the latter usually happens with untreatable mental illness).
I highly doubt suchs a system exists in the US.
[0] https://www.rijksoverheid.nl/onderwerpen/curatele-bewind-en-...
Because in some countries your "credit" is only the bad things (unpaid debt) whereas in America (and other places) your "credit" includes both the bad things and the good things too. So its in your best interest to add good things.
In other words, you're able to prove you're conscientious to entities who will give you some benefit for being conscientious.
Permission to rent, in the nicer places, is contingent on credit ratings, and so is the interest rate you will be charged for a mortgage, as well as getting access to one at all.
So it affects access to housing, and is quite important.
(Unfortunately the credit reference agencies maintain files with a lot of credit-harming errors in them. Sometimes even fictitious, unpaid/overdue transactions will appear, in fictitious credit accounts. Even obtaining a new phone contract can harm your credit rating temporarily - it affected mine a lot when I took out 3 new data SIM contracts. I think most people don't check their files, but they should, and then correct the harmful errors.)
I think the housing dependency on credit rating in the UK has become considerably more onerous in recent years, since the "credit crunch".
According to a bank I spoke with, it also affects whether you can be a director of a company, because banks want to know the directors of any company that holds a business account with them, and they can decline to provide account services if a director has a sufficiently poor credit record.
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
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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
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
or
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).
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.
The 5% back on Amazon.com purchases would give a slight edge to this new secured card.
If you buy anything on Amazon, but don't have a CC this may be better than 1% back.
Fry: "Do you take Visa?"
Clerk: "Visa hasn't existed for five hundred years."
Fry: "American Express?"
Clerk: "Six hundred years."
Fry: "Discover Card?"
Clerk: "Hmm...sorry, we don't take Discover."
That was the path I took, but as with all things ymmv
https://www.discover.com/credit-cards/secured/
>Earn 2% Cash Back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases
I hear it auto-converts to a regular, non-secured Discover IT after like six months or so.
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.
I see it as just another ploy to get you to spend more money in the Amazon ecosystem.
2-3 years ago, I was making a purchase on Amazon at least once a month. These days I only use Amazon for price-matching at other stores.
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.
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.
I don’t have any problems with store cards in general. I see them as a mutually beneficial agreement between retailers and frequent customers. It allows the retailer to capture a portion of the transaction revenue that would normally go to a third party (and some extra data about the customer), and in return pass on some of the savings to the customer in the form of discounts and rewards.
Sorry; that’s not a good product at all.
This assumes that one won't make use of their Prime benefits.
There are loopholes to this that make Prime much cheaper though.
For example, Prime Student [1] is $6.49/month or $59/year.
The EBT subsidized Prime membership mentioned elsewhere in the thread is $5.99/month (no annual discount).
You can also use Amazon Household [3] on an existing Prime membership to qualify multiple people in the household as Prime members. All members get the 5% benefit, not just the card holder. I doubt this stacks on the student version but it definitely does on vanilla Prime and likely on the subsidized version as well.
[1]: https://www.amazon.com/Amazon-Student/b?node=668781011
You factor in the cost of the Prime membership in the break-even calculation, but as someone else noted, that does not count the value of other Prime benefits. I was already a Prime member when the store card was introduced, which means I was valuing those benefits at ~$120/yr on their own.
Different people have different shopping needs/preferences. I have no trouble conceiving of the idea that what might be a good value to me might not be for someone else. In your case, I wonder how you are able to say "Sorry; that’s not a good product at all" with such conviction when there are so many people out there (~100 million) with Prime memberships in the US.
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.
"Normal" cards are not backed by anything.
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
Same with Apple or Google.
So there is a fee, it's a $119/year prime membership
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.
If you let your membership run out it will only give back 3%. https://www.amazon.com/iss/credit/storecardmember?plattr=PLC...
> 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.
I think a 28% APR is way high and their tiered financing strikes me as complicated. Do they clearly describe the tiers and payments required to stay in compliance and avoid that hefty interest rate? I bet they don't, that certainly isn't the case with other Synchrony cards.
So then why bother opening a credit card?
Plus, if you're traveling, you really don't want to put hotels or rental cars on a debit card - they put a huge hold on your balance.
Isn't any hold equally large on a credit card? I've never noticed any differences in the size of holds between credit and debit (Finnish VISA cards).
So you don’t want to give someone access to your bank account unless you absolutely have to, since they can “authorize” or “hold” funds in your account which can cause other expenses to not get paid.
Somewhat related, I'm guessing from this that card usage limits are not common in US? Here almost(?) all debit/credit cards have daily limits that you can change via web/app/call, so there can be no arbitrarily sized holds.
And various other benefits such as airline and hotel status.
I don’t see a reason to turn down free money.
2) Benefits - purchase protection, extended warranty, return protection, travel insurance, rental car insurance, free checked bag, etc.
3) Earn cash/miles on purchases.
4) Ease-of-use, I don't have to go to the ATM and take out cash. Sure, I can use a debit card, but that's giving someone access to my checking account, with a credit card I'm playing with someone else's money, I don't have to worry about my mortgage bouncing if there's unauthorized charges, for example.
5) Sometimes required when renting a car.
1. Cashback. You can expect a minimum of 2% with relatively easy to get cards.
2. Consumer protection. A bunch of this has been extended to debit cards, but it's more of a courtesy from Visa et al rather than a legal obligation. In short, you are legally protected from being made to pay debts that you do not rightfully owe. Anything you pay for with a credit card is incurring a debt rather than giving someone money. This is important because if the merchant uses fraud or misrepresentation and is not willing to fix things, you can assert your legal protection against the invalid debt through a charge-back. If you use cash, your legal recourse is suing them, which at the minimum will cost you a full day in small claims court.
3. Credit card float - buy now, pay a month from now. This isn't as big of a deal as the cash back, since you should have cash at least a month in advance, but at least it gets you the interest payments. The real benefit is that you can largely eliminate non-planned transactions from hitting your bank account balance, which gives you certainty of avoiding overdraft fees. If your everyday spend is on credit, you can look up last month's credit card statement balances and known fixed expenses (like rent) and verify that your bank account will remain positive through the end of the month.
4. Better fraud-handling flow. Your bank has 10 days to refund or give provisional credit for debit fraud. So it means you can be out thousands of dollars for over a week while they investigate. Credit card fraud has a much better flow - the issuer cancels your card and mails you a new one, and never collects any money from you.
https://www.amazon.com/Amazon-Prime-Rewards-Visa-Signature-C...
https://www.amazon.com/Synchrony-Bank-Amazon-com-Store-Card/...
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 has practically brought payday loans to scale.
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.