Amazon’s new card is ready for ‘Prime’ time

While Amazon.com drew lots of hoopla with its Prime Day event, another offering could also prove to be a powerful incentive for Prime membership: the Amazon Prime Store Card. The draw is similar to that of Target’s popular REDcard — holders of Amazon’s card can earn a five percent discount on purchases.

Like Target, the discount is only earned on purchases made with Amazon.com. The card may not be used for "the purchase of Prime Memberships, digital newspaper and magazine subscriptions, or games and software downloads," according to Amazon’s website.

The card also offers six-month zero-interest financing for orders over $149, 12-month zero-interest financing for purchases over $599, and 24-month zero-interest financing on select more-expensive items, including some HDTVs.

The Amazon Prime Store card represents an upgrade to the Amazon.com Store Card with the difference being the five percent discount. The card packs no annual fee and zero fraud liability but comes with a variable purchase APR of 25.99 percent.

Amazon Prime Card=

Source: Amazon.com

As part of a limited time offer, an Amazon.com Gift Card is instantly loaded onto a user’s Amazon.com account upon the approval of their credit card application in the amount of $10 for non-Prime members and $40 for existing members, based on RetailWire observations.

Amazon quietly launched both the Amazon Prime Store Card and Amazon.com Store Card in March but has not been aggressively promoting it with marketing or public relations. The tech blogging community appears to have only found out about it last week after a writer at Re/code stumbled upon it on Amazon.com.

"The card is obviously great for Amazon if it attracts new shoppers to the Prime program, which costs $99 a year and comes with two-day shipping and media streaming, or helps retain current ones," said the writer, Jason Del Rey. He also said Amazon might want to encourage purchases on its own Store Card to avoid higher transaction fees from Visa, MasterCard and American Express.

Amazon, known for being secretive, hasn’t commented directly on its Store Card. The credit card community, however, has heard about it, and there are more than 20,000 consumer reviews of the card on Amazon.com.

BrainTrust

"Target’s REDCard has set a powerful example for Amazon’s Prime Store Card; penetration is above 20 percent and REDCard holders visit more often and spend more. Retail competition is shifting away from individual transactions to memberships and platforms. Anything that subtly locks households in by adding value can work if well executed."

Keith Anderson

Founder, Decarbonizing Commerce


"There are many pros, the greatest of being the 5 percent cash back on Amazon purchases. The biggest con is the 25.99 percent APR."

Max Goldberg

President, Max Goldberg & Associates


"Remember when usury was illegal?"

Cathy Hotka

Principal, Cathy Hotka & Associates


Discussion Questions

What do you see as the pros and cons of the Amazon Prime Store Card for Amazon and consumers? Should Amazon more aggressively roll it out?

Poll

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Richard J. George, Ph.D.
Richard J. George, Ph.D.
8 years ago

This is another step in Amazon’s strategy to offer fast, convenient and customer-centric products and services to its customers. The biggest upside is the matching of the 5 percent discount currently offered to Target’s REDcard holders, plus the saving of transaction fees.

I would recommend an aggressive roll-out. This will raise the bar for Walmart, Jet.com and others to profitably compete in this space.

Keith Anderson
Keith Anderson
8 years ago

Target’s REDCard has set a powerful example for Amazon’s Prime Store Card; penetration is above 20 percent and REDCard holders visit more often and spend more.

Retail competition is shifting away from individual transactions to memberships and platforms. Anything that subtly locks households in by adding value can work if well executed.

Chris Petersen, PhD
Chris Petersen, PhD
8 years ago

Which major retailer won’t have their own credit card?

And this new Amazon credit card is all about Prime. The more that Amazon can attract and retain Prime members, the more profitable it becomes with core consumers.

Brand loyalty is many things — quality of service, reliability, perks, etc. The whole is greater than the sum of the parts. But this is yet another important part of the holistic Prime strategy.

As Amazon aggressively promotes Prime in other countries, it will be interesting to see how the Prime Store Card will play across international boundaries and credit regulations.

Max Goldberg
Max Goldberg
8 years ago

There are many pros, the greatest of being the 5 percent cash back on Amazon purchases. The biggest con is the 25.99 percent APR. With Amazon being one of the largest retailers in the U.S., having an affinity credit card makes sense and opens a new revenue stream for the company. Accordingly, they should put more marketing muscle behind it.

Mark Heckman
Mark Heckman
8 years ago

Store cards can be very useful tools in acquiring new shoppers/users provided the launch is aggressive and the benefits of the card outweigh the thought of a shopper having one more card/account to manage.

For those established Prime members who are already hooked on Amazon for a variety of product categories, having a store card option that incentivizes these members to expand their range of purchases makes sense.

To that end, I have often thought that traditional brick-and-mortar supermarkets should explore store cards (beyond co-branded credit), in the same fashion that Target and others have. In this new environment of expanded retail options, Amazon’s innovation is putting new pressure on all competitors to up their game.

Cathy Hotka
Cathy Hotka
8 years ago

Remember when usury was illegal?

The card will probably be a magnetic draw, encouraging customers to buy even more from Amazon than they already do. But woe to him or her who falls behind on payments. That 25.99% percent interest rate should be a deal-killer (but won’t be, for less-than-savvy customers).

Tom Redd
Tom Redd
8 years ago

Amazon can roll out their shopper death card with pride and join all the other shopper site specific cards. Nothing new here, just more PR content for their aggressive marketing department. They want to cut some card fees and make some money on a loser interest rate. Amazon cares about shoppers? NOT! 25 percent interest is not caring — that is stealing.

The trick for smart shoppers will be to go Prime and use AMEX. Make Amazon pay some fees for trying to abuse you.

Amazon sets no new examples — this is old stuff. We just have retail news feeds that are run by Millennials who see it as new. Kids, your moms and dads have had department store cards since they were younger than you. Nothing new here.

Graeme McVie
Graeme McVie
8 years ago

Amazon is once again taking an interesting step into a different type of offering that will enable them to compete across a larger portion of the value chain. Issuing their own store card will certainly reduce the fees that they routinely have to pay to the traditional credit card companies and they should be able to understand the detailed risk profiles for each customer given the extensive shopping information that Amazon has available on each customer, thus reducing the bad debt costs.

Amazon has run the numbers and they believe a 5% discount is going to be manageable within the structure of their income statement but going live with a large fixed amount could be risky; after all, Amazon is not working with the fattest of margins to begin with. However, assuming Amazon uses their customer data wisely, they can mitigate these risks and capture a greater share of the profit pool while further building the loyalty of their customers.

Mark Price
Mark Price
8 years ago

There are very few cons for the Amazon Prime Card for consumers or for Amazon. For Amazon, this card will drive additional revenue streams from the top tiers of customers, those who are such heavy Prime users that their profitability is lower. For consumers who are heavy users, the card permits easy financing and cash back.

Hard to beat as a deal.

Kai Clarke
Kai Clarke
8 years ago

It is readily available and easily applicable to most Amazon purchases is the big pro. The con is the incredibly huge…a variable purchase APR of 25.99 percent. This is a very large APR and one that shouldn’t be dismissed lightly.