U.S. Markets closed

Amazon’s new 5% back card is its next shrewd move to dominate retail

Ethan Wolff-Mann
Senior Writer

Amazon (AMZN) has offered a credit card for years, but on Wednesday, the company announced a new free card targeted to its most loyal customers: Prime users.

The card itself — called the Amazon Prime Rewards Visa Signature Card — has no additional fee to Prime members, who already pay $99 per year, and sends back a generous Amazon credit of 5% of whatever is spent on the website. That means, when you’re shopping on Amazon, you’re essentially getting 5% off everything. For other categories, the Amazon card, provided through Chase (JPM), is offering 2% in Amazon credit for purchases at restaurants and gas stations, and 1% for everything else.

Like Chase’s famous Sapphire cards, this new Amazon Chase card is made of metal and comes with no foreign transaction fee, which allows it to clear the bar as an acceptable card for international travel. Additionally, consumers get a $70 Amazon gift card upon approval.

Some credit cards do offer high percent cash/credit back benefits on certain products, such as American Express’s Blue Cash Preferred, which gives cardholders 6% cash back on groceries. But since Amazon’s warehouses and services cover pretty much the entire retail sphere, including grocery, the Amazon Prime Rewards card’s credit back is tantamount to 5% cash back on everything — an unprecedented amount of benefits for a free credit card.

The new cards will be made of metal, like the trendy Chase Sapphire cards. Source: Amazon

The new cards will be made of metal, like the trendy Chase Sapphire cards. Source: Amazon

Already, Amazon has two similar cards — the Amazon Prime Store Card and the Amazon Rewards Visa. The Visa, a regular credit card, offered 3% back in Amazon credit. The Prime Store Card offered 5%, but wasn’t a real credit card because it could only be used for purchases on Amazon. The new card combines the best parts of both, the 5% of the Prime Store Card and the universal access of the Visa, which the new card is replacing for its Prime members. (Non-Prime cardholders, if they want this card, can get it and simply receive the old reward scheme of 3% Amazon credit back for Amazon purchases.)

To the no-fee point, it’s worth noting that the benefits are contingent on a $99-a-year Amazon Prime membership. But since so many people already pay for the service—it’s estimated that half of US households had it a year ago — that implicit fee has already been paid for, unlike the annual fees of other credit cards. As for the other nuts and bolts of the card, the Amazon Prime Rewards card offers APR of 14.74% to 22.74%.

With those benefits and penetration into American households, it’s likely to be an incredibly effective carrot to coax more consumers to shop at the Seattle-based company for absolutely everything. Though those generous benefits may hurt the company’s bottom line as it essentially subsidizes its sales, it appears to be a solid tactic to get more and more people hooked.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, tech, and personal finance. Follow him on Twitter @ewolffmann.

Read more:

Bipartisan Committee: Killing Obamacare would cost $350 billion

Here’s who Donald Trump follows on Twitter — and who he has unfollowed

Robots will kill jobs and make inequality worse

Craftsman’s famous lifetime warranty in question after $900 million sale

61 businesses Trump has targeted on Twitter

If you paid to see your credit score, it may not be the real one