Amazon is launching a new credit card as it battles Walmart for low-income customers

Amazon has launched a new credit card for people who are trying to rebuild credit.

It's a secured card that requires a security deposit, has harsh penalties if users don't pay their full bill every month, and is mostly only usable at Amazon.com.

It does come with a perk for Prime members: 5% cash back on all purchases.

It's another initiative to capture low-income shoppers who may not be able to own a traditional credit card, and often shop at brick and mortar locations like Walmart.

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Amazon is trying to chase another group of shoppers.

The company unveiled on Monday, in partnership with Synchrony bank, a new store credit card. It's called the Amazon Store Card Credit Builder, and as the name implies, is targeted at customers trying to improve their credit score.

It's a secured credit card, which means customers will need to give a refundable security deposit for how much they would like to borrow against. In as little as seven months of good financial behavior, the card can be upgraded to the regular Amazon Store card, which does not require the deposit and can be used as a regular store credit card.

There's no annual fee, though, and Amazon Prime members get 5% cash back on every purchase. The card is mostly only valid for Amazon.com and some places that support Pay with Amazon functionality.

According to the website, it is not valid to buy:

Digital rentals

Any digital and print bundle subscriptions, like newspapers and magazines

Cell phones that come bundled with a plan

Purchases with Amazon subsidiaries

Any Amazon Game or software downloads

Any digital add-on subscriptions like Starz, Hulu, or Gamefly

Amazon Restaurants orders

Any purchase at Whole Foods Market

Ted Rossman, an industry analyst for CreditCards.com, said in an email statement that the card is a “solid option for people who are new to credit or rebuilding their credit after prior missteps, but there are some risks to be aware of.”

“It's always important to pay your credit card bills in full, and that's especially true with this card,” Rossman said. “The interest rate is very high – 28.24% – and if you fail to pay a 0% promotional offer in full by the time the term expires, you'll be charged retroactive interest on the average daily balance going back all the way to the original purchase date.”

The credit card is clearly designed to cater to the customer that does not already have a credit card or is unbanked, and is therefore unable to shop on Amazon.com like its most loyal shoppers do.

There's still a large part of the US population that is unbanked — that means no checking account, savings account, or credit cards of any kind.

That leaves this population — 15.6 million people according to a report by the FDIC in 2017 — without any way to shop online via traditional means.

Read more: Amazon's plan to reportedly offer 'checking accounts' is a direct assault on some of Walmart's most loyal customers

Amazon has already gone after these customers with Amazon Cash, which allows you to load money into your Amazon account through a convenience store, but the bank account could be faster and easier.

Most of these potential customers are younger, or have a lower income than Amazon's traditionally well-heeled Prime members. But they spend money too, and as Amazon dives more heavily into its fresh grocery and essentials business, the convenience may drive them to the website.

This customer segment has long been Walmart's forte, and they have their own products geared toward this customer like low-fee checking accounts and money services done in the store like low-fee check cashing and bill pay.

In 2016, the chain generated $13 billion in sales from customers using SNAP benefits— otherwise known as food stamps. Amazon already makes a play for those customers by offering discounted Prime memberships to those with EBT or Medicaid cards, and the company is also testing a pilot program with the USDA to offer SNAP benefits to online shoppers.