Apple Card: More Than Just a Credit Card

(Jeff Porten) #1

Originally published at: https://tidbits.com/2019/03/28/apple-card-more-than-just-a-credit-card/

Apple’s forthcoming Apple Card and updated Wallet app promise innovative features and consumer-friendly particulars. But Jeff Porten thinks Apple Card will have a farther-reaching impact.

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(Dana Schwartz) #2

I think Senator Warren will have a lot to say about the choice of Goldman Sachs, as well as her thoughts mentioned about the big-tech breakup. For example:

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(John) #3

Jeff, thanks for the article. By the way, it’s the Consumer Finance Protection Bureau (as opposed to “Board”) https://www.consumerfinance.gov

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(David Ross) #4

The 2% discount (3% on Apple purchases) and daily reward of such will atrract a non trivial number of people.

But for those of us who “play the credit card game” it is an interesting card but likely not worth loosing out another card for it. (Google Chase 5/24 to see what I mean.)

I have a Costco Citi card that gives me 2% on anything I buy from Apple PLUS extends the Apple warranty by 2 years up to a total of 4 or 5 years. And I have some other travel rewards cards that net out to 4% or 5% returns plus add a year of warranty if I like my discounts in terms of miles and points.

I might get it but I’d need to see more details about exactly what benefits I’d get.

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(Will M) #5

For a global player like Apple, and in line with the “no fees” emphasis, I would expect “no fees” also means no foreign transaction fee. If so, this would be another place where the Apple Card stands out. In my experience, most “no annual fee” cards have a foreign transaction fee.

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(Doug Miller) #6

Apple did say no foreign transaction fees, which is pretty unusual. That is another benefit of the Costco Citi card, though. That also has no foreign transaction fees for Costco members.

I would guess that the main attractions of the Apple Card are the visibility and definition of charges and location of charge within the app, and the lack of late fees and interest rate penalties for people who have a tendency to be less reliable about paying bills on time.

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(Marc Z) #7

Apple said their card has no foreign transaction fees. But I saw some website zoomed in on the slide showing their example statement and one of the items was a foreign transaction fee!

My Chase Amazon card has no foreign transaction fees. I used that in Europe last fall and it saved me hundreds of dollars my other card would have charged me. Those fees really add up when you’re traveling!

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(Alan Forkosh) #8

I remember seeing the same posting. However, the site later noted that the picture was of the statement for the non-Apple Card; the Apple Card statement showed no fee.

As one who always pays off cards before the due date, I’m not interested in the revolving interest charges. However, I am curious about a few things left unsaid:

  1. Is the periodicity of a statement still monthly? Will the transactions be easily exportable on a statement basis to a financial program (i.e. downloadble in .qfx format)?

  2. Apple has said that monthly bills will be due at the end of a month. But what is the statement closing date? How many days of no-interest grace will be provided between the closing date and due date ((i.e. the grace period). For most credit card providers, it’s between 21 and 28 days.

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#9

This is an excellent article. Over the last few months, I’ve read some interesting developments in the global credit card market, and I’ll bet Apple is working behind the scenes to upend the business in this highly desirable and rapidly growing market in which Alibaba and WeChat have been highly successful in building cashless payment options. If Amex can negotiate a deal with a Chinese bank, I’ll bet Tim Cook can too:

https://www.bloomberg.com/news/articles/2018-11-09/amex-is-first-foreign-payment-company-granted-access-to-china

The market for streaming entertainment services in the highly regulated Chinese market is growing rapidly, and though Netflix tried to negotiate deals, nothing has happened. And although internet service currently tends to be slow and spotty in many areas, China is pushing ahead with 5G. Apple Music is already available there, and Apple’s manufacturing presence is important to China’s economy, so they might have a better shot than Netflix. And although Netflix has been hugely successful in Mexico, Brazil, India, etc., Apple has a good chance in other emerging markets too.

News+ also has great international potential. Condé Nast, one of the founders of Texture, publishes editions Vogue, GQ, Wired, Traveller, Architectural Digest, New Yorker, Glamour and more across the globe, including in China. Another Texture founder, Hearst, publishes Cosmopolitan, Elle, Esquire, Harper’s Bazaar, etc., is also a major presence across the globe, not to mention other publishers.

An international roll out of Apple’s new credit card would be a great boost to the sale of hardware and subscription services, in addition to the revenue it would generate in and of itself.

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(gastropod) #10

I’d get one just for the much better security and privacy from merchant tracking if there were no other considerations.

But there are two things that give me pause:

Goldman Sachs? Really Apple, was climbing in with such a sleaze ball the best you could do?

More importantly though is something that I never see mentioned in ‘getting a new card’ discussions: It can cost hundreds of bucks from increased insurance rates. Insurance companies claim that getting a new card is a red flag that you’re going to commit fraud or abscond, and they convict and penalize you in advance of any actual crime because they’re allowed to. When I got my credit union card so I could ditch my Chase card, I ended up paying over $300 in increased home insurance rates over several years. I only knew because WA state requires disclosure, and because I read the home insurance fine print. That was about ten years ago, but with less regulation these days it could be even worse now.

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(David Ross) #11

Odd. Haven’t heard of this one. My daughter and I do a lot of CC spending to get points. We both have over 20 open cards each in our families. And our insurance didn’t change once we started this.

Now if you only have a few cards without much of a limit and spend up to the limit that can really ding your credit score. A big factor in your score is how much you typically have ourstanding in relation to your total limit. And I suspect that a lower credit score can cause your to pay more for insurance.

Anyway compared to the cards I have and that are available (and your goals) the Apple card appears to not be bad, just not all that great.

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(David Ross) #12

Here’s a good overview of the Apple card and others and why you might pick each.

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(gastropod) #13

It can depend on state laws. WA allows the surcharge aka theft, but requires disclosure. Other states may have different rules.

It could also depend on their algorithms. If someone has a years long habit of getting new cards, it might lower the risk score.

I’m pretty sure that I have a dreadful overall credit score, because I don’t normally buy all that much, I pay in full every month, and have no debt of any kind. Only the credit union makes any money off of me at all, because they get to use the money in my accounts. Financial people hate people like me. Which is fine since the feeling is mutual.

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(David Ross) #14

I’ll post this here as I’m assuming a LOT of people in the Apple eco system will not get to deal with how a new credit card will impact their finances. I also know that some people have misconceptions about how credit scores work and how credit cards impact such scores. (Adam, tell me to shut up if you want this to stay off TidBits Talk.)

These links are from a site I frequent called “The Points Guy”. There are dozens of others. “One Mile At A Time” is another I like. I’m travel oriented so I tend to follow sites that deal with travel things.



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(Will M) #15

Thanks for those pointers to articles from The Points Guy, David Ross. I do wish the articles had publication dates though. At least one of them seemed to have information that was out of date.

There are two questions that I have not seen clearly answered. First, what is an Apple purchase? Is that something that has the Apple logo on it or a service from Apple? Or would it include anything purchased from an Apple store, even if it was not a Apple product? Second, does the store matter for purchasing an Apple product? I’m wondering both about other Apple Stores (for example, Apple Store for Education) and other retailers that sell Apple products. And would a non-Apple product from the Apple Store for Education be the same as the same non-Apple product from the Apple Store? Would brick-and-mortar be the same as on-line?

I assume that Goldman Sachs would have some mechanism such that the customer could automate payment-in-full each months.

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(Jeff Porten) #16

Fun discussion. A few replies, but first: it strikes me in the conversation here (and a few I’ve had elsewhere) that there’s a huge perceptual divide between people with good credit scores (and presumably higher income), and how the consumer financial industry treats both people barely cracking acceptance and young people new to credit. For both groups, the interest rates and fees are predatory, and the obfuscation of how credit usage translates into increasing debt is very high. (Hence the part of the article saying that providing this data to consumers is revolutionary.)

Leads to reply 1 to Dana Schwartz: it really can’t be overestimated how much goodwill this will generate among consumer advocates, including presumably Warren. For as long as I’ve been aware of these groups, they’ve always focused on government regulation because it was simply a given that no corporation would ever unilaterally do this.

As for Goldman Sachs—I’m told that when they launched their consumer credit, most of their customers were extremely wealthy people who used Goldman as their investment bank. I.e., “I have $500 million under management with them, so it’s convenient to have a checking account and credit card.” The consumer bank and the investment bank are separate by law, so in theory your opinion of the investment bank should be as well. (In practice, a corporate culture could cross over, but in my anecdotal secondhand experience from Wharton friends, the two groups don’t socialize.) I can see why Goldman retail would see this as a way to diversify their customer base in a big way.

John (utility2): updated, thanks!

David Ross: analysis I read today mentioned something I should have twigged to, that the cash back reward is likely to be available for the first time to borrowers who don’t usually qualify for rewards cards. The story estimated that 2/3rds of Americans will likely qualify based on the interest rates mentioned—and if Apple is telling the truth, a higher percentage because they’ll offer 24% rates to the 25-28% group as well.

Will M and others: I fully expect that one month after the Card is out, we’ll see a flood of tweets and posts to the effect of “APPLE LIED!!!1!1!!!” because they got hit with some low-volume uncommon fee. I’m not sure what causes a foreign transaction fee? When I’ve traveled (and it’s not been for a few years internationally), debit card and ATM usage only costs a few tenths of percent extra in the exchange rate.

Alan Forkosh: I’ll be shocked if downloads don’t integrate with every major financial app. My guess is that the grace period will be “no interest until the following cycle” as per usual, otherwise there’s a small interest charge on charges made the 1st and paid the 31st. The statement that paying twice a month lowers interest payments indicates daily compounding, so my guess is that the grace period is until the same day the following month.

MMTalker: I’m not going to prognosticate international rollout because the regulatory issues are 10x normal. Here Apple can bypass being regulated like a consumer bank by partnering with one; if that’s not true elsewhere (and I’m sure it isn’t in the EU), they’re going to be very slow to expand. And since I suspect that Apple is going to use an adjusted risk model, they’re going to want to test those assumptions with a year or two of data before expanding.

Gastropod: Your credit rating is independent of interest paid, until it gets very high when it lowers your score. They want to see frequent charges that are paid off, and it certainly doesn’t hurt that you don’t carry any other debt. The kind of debt that improves your score is very large loans paid off monthly over time, i.e. a mortgage.

Will M: any payment made at Apple is 3%, so non-Apple products at an Apple Store or non-Apple providers in the App Store all qualify. At least, if there are exceptions (i.e., for education stores) that’s not stated yet; OTOH, my educational storefront is the Penn Bookstore and that’s not Apple.

Will close by saying: I wasn’t a financial journalist before this story, so while the story is fact-checked my comments are not, and I welcome corrections.

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(Jolin Warren) #17

Well, ‘privacy’ in that Apple doesn’t see the data, but Goldman Sachs does. To be honest, I’m much more comfortable with Apple having my data than Goldman Sachs.

Exactly. I will never get an Apple Card until they use an ethical financial services provider.

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(Tommy Weir) #18

This Matthew Panzarino article is a useful ‘how it works’ piece.

All a bit moot in Europe… the absence of Tap to Pay with the card will be a big disincentive on this side of the water. We have Apple Pay and Google Pay and young people do use it but Everybody taps.

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(Adam Engst) #19

The main detail in this article that was depressing for us is that Apple Card is tied to an individual—there’s no way to get multiple cards for the same account. Tonya and I only ever do that to reduce the amount of accounting and mental overhead in dealing with multiple cards (I honestly hadn’t even considered the possibility that a credit card would ever not make that possible). Unlike folks who try to game the points and rewards systems, we don’t find dealing with credit cards amusing and we try to have as few as possible.

So I’ll probably have to sign up for Apple Card to see how it works and be able to write about it, but it will have to be a truly unique experience for us to use it over any other card.

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(Al Varnell) #20

At the 36 minute mark of the keynote the VP for Pay and the screen behind her says “Goldman Sachs will never share or sell your data to third parties for marketing” or advertising.

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