Is the Amazon Store Credit Card a Secret Weapon?

Could changes in the US credit card market make the Amazon Store credit card a surprise winner? We think it could happen. 

Amazon continues to confront natural limits on growth in its US retail business, especially as Prime membership growth slows down and competition heats up. We’ve long wondered what else Amazon can do to encourage its customers to spend even more at Amazon.com. Already the “everything store”, Amazon faces challenges making inroads in major categories like grocery. Beyond selection, service, and price, there is at least one more traditional retail lever: offering credit.

Retailers have long exploited proprietary credit cards a tool to boost sales, and in some cases to build a profitable lending business. Amazon is on this path with a variety of branded credit cards. 

Over the past few decades, most store charge cards and branded credit cards have been transformed into Visa, MasterCard, and in some cases American Express cards. Those moves allowed for expanded rewards and bigger credit balances on which to charge interest. The Credit Card Competition Act under consideration in the US Senate may upend that marketplace. Relatively high credit card interchange fees (swipe charges), which some argue raise retail prices for consumers, fund all those rewards. Competition to reduce interchange fees could make those rewards impossible to offer.

Amazon offers a Visa credit card through Chase and an Amazon-only credit card through Synchrony Bank. Each offers a Prime and a non-Prime version, with the Prime version including a 5% reward on Amazon purchases. As true credit cards, each offers the ability to pay over time, also. The Amazon-only cards (Prime and non-Prime) also offer a secured version, for those still building credit. 

Because of this, Amazon has a relatively large base of non-Visa Amazon store card holders. We estimate it at over 20 million cardholders in the US. That is somewhat less than the number of Amazon Visa cardholders, but still possibly the largest non-Visa/MC/Amex credit card base in the US. 

Together, proprietary credit card customers make up almost one-quarter of all Amazon.com customers, with 13% Amazon Visa cardholders and 11% Amazon Store Card holders (Chart 1).