The Apple Card is a great credit card for people that aren't optimizing points for travel (most regular people).
The software is solid and Apple prevents them from reselling your data to third parties. The cash back is super easy to use and visible (and the extra percentage on Apple purchases is a nice bonus).
I have some cards I use for perks (Amex Plat/Gold, United Club, used to have Chase Sapphire Reserve) but I used the Apple Card as my sole card for a while and I kind of miss the simplicity of it. With Amex I feel like I'm fighting against an Army of Amex employees trying to make it as hard as possible for me to use the card's perks where as with Apple I feel like they're genuinely trying to make the software usable for me, the incentives are more aligned.
Every time I have to use Amex's site to 'enable' a perk and then read the fine print to make sure I actually get the benefit it makes me angry at some invisible product manager that hates customers.
Yeah, I just can't spend my time on that stuff. I got a card that just gives me 2% on everything and I'm calling it a day. no fee.
Airport lounges sound cool, my friends sometimes get a deal on travel/hotel. But they also can't use points in some situations for weird reasons. Another uses a spreadsheet to optimize his poins. I just can't devote that kind of time to that stuff.
The points can really be worth it though. In 2 years, over 3 cards (between my wife and I), I've racked up nearly 400,000 Aeroplan miles, which is valued somewhere around $8,400 (2.1c per mile). And this is regular spending, and pretty basic cards (AMEX Cobalt and TD Infinite). These aren't the $700+/year cards, all are $1xx/year.
You are gambling that the airlines let you spend those points or miles on something that you would have bought anyway at a conversation rate of $0.021 per point or mile, but there is no guarantee. They hold all the cards and they can devalue those anytime they like.
To me, if I have to spend any extra time figuring out how to spend those miles and points, or if I have to make even a single extra stop or adjust my itinerary to make use of them, then it is not worth it compared to a simple 2% cash back scheme.
You’re 100% right. I had 800k points I was sitting on for years because it took weeks or months of advanced (in both senses of temporal and complexity) planning to try to spend them optimally. No one is getting optimal rewards under constraints. Sure, it is possible to get round trip business class SFO to SIN for like 60k points in some edge cases. But the more typical scenario is that only on certain flights at certain times that are scooped up immediately by people who are in the know and religiously checking for exactly these deals.
What really happens is you hope you can do that but then get frustrated and either sit on your points for years or spend 2-3x the “optimal value” amount for something basic. Don’t get me wrong I like points, and it feels good cashing in on international business class tickets, but spending them in any way close to optimal is a stressful mess of transferring between airlines, calling service reps to get hidden seats and deals, gambling on upgrade availability, etc.
Finding great deals is not something accessible to someone who is only willing to spend 1-2 hours looking for a flight. You really do need to make it a hobby. I asked on r/awardtravel a few months back where all the deals were for an international flight I was trying to book 5 months in advance and got downvoted to oblivion because “everyone knows those deals are gone by now, you need to look at least 9 months in advance”.
I'm about to book business class tickets over to Lisbon -> Amsterdam -> Vienna, for 140k points and $300 in fees. All it cost me was a few hours spread over a year as I signed up and churned through 3 different credit cards.
Easily worth it IMHO. If I'm spending that money anyways, putting a bit of effort in to maximize the rewards seems logical.
$8,400 over three years is about $230/month. And aside from the opportunity cost of your labor to optimize that, you should also theoretically account for any purchases that you wouldn't have made if you weren't trying to optimize your points (if any; I'm sure it's hard to attribute).
With current interest rates of around 5%, one could get the same stream of income ($2.8k/y) by just plonking $50k or so into a high-yield savings account or money market fund.
I have likely spent 1 hour applying for cards, loading them into Apple Wallet over 3 years. If you are doing the math on opportunity cost for something you spent 1 hour over 3 years, you are already wasting your time.
To be honest, the $50k argument isn't comparable. It's like saying "Oh you have a side gig making $10k/year, why don't you just invest $200k in a money market fund instead?" First, someone could do both. And second, it's not even a logical comparison.
Best consumer cash back card is 2%. I'd have to spend over $400,000 to get $8400 in cash back. I definitely haven't spent close to that. So if I value the $8400 at cash value, it's better than any cash back credit card available.
It's been like 10 years since I looked into the options but at the time I was getting my first cards I was doing the math on various points cards to compare to cash back and what I found was, unless you were really gaming the system, the best you could hope for is roughly 1-2% returns. And the system, whether you're gaming it or not, also requires you to then play in the system so any given card might work out to like 5% if you spend those points on air travel... with a whole host of restrictions including but not limited to a specific airline. I don't have the time in my life to game the system so I can fly marginally cheaper with a specific airline and therefore restricted set of airports and scheduling options.
Travel cards haven’t been that restrictive in the time I’ve been using them (since around 2016). Chase Sapphire Preferred/Reserve and Amex Gold/Platinum don’t have any restrictions on what earns points, it just needs to code as travel (flights, rides, or hotels) or restaurants and while there’s some benefits from using the Chase/Amex portals to book even that’s not required. Similarly points can used towards anything that codes as travel.
Of course there are airline/hotel specific cards and those may be more restrictive but I’ve never seen the point in those.
I used to have a sapphire preferred, which promised 1.25x point value or something when spent on travel. When I went to book via the chase portal, everything was magically .25x more expensive when compared to the airlines page.
I can’t say I’ve observed that. Checking just now the prices I’m seeing in the Chase portal are identical to those listed on Expedia (which the Chase portal is built on). Some flights are slightly cheaper on airliner sites though.
hmm, maybe it was just jetblue specific, or something about the time I was booking. But it left a bad taste in my mouth, I decided to cancel the card at that point.
The one points card I have actually is a Marriott card which obviously only works with Marriott, but Marriott is everywhere and doesn't restrict scheduling options so it was an easy choice at the time. I used to travel weekly for work and the hotel was on me for reimbursement whereas the airline was on company card, and Marriott was the preferred booking option by my company so it made a lot of sense to get the card. The math at the time for that was like 5-7% when spending the points at Marriott plus a free night for what was an $85/year card. Useful for personal travel.
I’ve derived quite a lot of benefit from a Sapphire Reserve and Amex Plat over the years, though a lot less recently with the pandemic. They pay for themselves very quickly if you do any amount of travel at all, like recently I used the points earned from a trans-pacific flight to cut the cost of a hotel stay later during that trip in half (and booking that stay also netted me a nice chunk of points).
Might drop one of the two at some point though since they both cover the same niche.
I definitely believe it can be worth it monetarily. But to me it seems like such a maze of which cards to get, what point transfers to do. When it comes down to it, I don't even travel that much. Churning cards. One of my friends has a bunch a points that are going to expire, or there's point inflation or something?
I may waste my time on other things (like on hn, lol) but I don't think I want to spend it on that.
Exactly, there are 0 cards that would give cash back equivalent to what I've spent. I suspect it's like $100,000-$150,000. So being conservative, it's a 5% 'cash' back card.
I mostly fall into the 'set it and forget it' group. But, if you travel it can pay to add another card. Also, there's a middle ground between do nothing and track on a spreadsheet. It's pretty easy to have an Apple Card for 3% Apple things, Amazon card for 5% at Amazon, and then something like Venture X (or other travel friendly card) for everything else. One of nice things about the Venture cards is you simply book travel however you want then apply points to the purchase after the fact - no blackouts.
And since you mention lounges - if you travel 3+/year, lounges and TSA Pre/Global Entry really lower the frustration of travel.
I was reading reviews of the Amazon card and it sounded like there was a huge catch with fees and interest making that 5% not worth it. That's the only card I think would be worth adding for me. I don't do enough travel or shopping at Apple to make other cards worth using if I have a regular cash back card.
The amazon card has absurdly bad interest rates if you're carrying a balance, but that's not unusual with points cards, most of them are >= 25% APY.
There is also a weird gotcha if you use the cash advance balance transfer offers. It's 4% transfer fee, 2% APY for a year, but the cash advance pays off first, so, any purchases will continue to accrue at the 25% APY if you make them - but if you want to do a balance transfer just lock the card afterwards.
Other than that it's fine, actually great. I make a shitload of rewards on those amazon purchases, pay the balance monthly, and cash it out every month and don't pay any fees/interest.
You should never carry a balance on any card anyways so I think the high interest rate is moot. I don’t even know the interest rate of any of my cards. The 5% back on Amazon is worth it if you buy a lot on Amazon.
You do have to maintain a Prime membership, but there are no other regular fees. It's trivial to use the earned money on other Amazon purchases. No CC points/cash back are worth carrying a balance on any card.
It really is quite nice. If it weren’t for my SoFi credit card giving a flat 2% back on everything (which can be routed into a 4.5% savings account), my Apple Card would be my primary card. As it is it primarily gets used for Apple Pay since the cash back is the same in that circumstance as well as for Apple stuff for the 3% back.
Wouldn’t be surprised if between the two Apple will be the one to keep the perks going longest though… my hunch is that SoFi will dial theirs down once they’re done trying to aggressively grow.
Apple still beats SoFi in the UI department though. More bank/card apps should be modeled after the Apple Card page in Wallet.
Amazon card is a good option. 5% cashback on Amazon purchases (and often with "no interest if paid within 12 months" type terms on stuff like TVs. 2% on gas and 1% on everything else. Cashback accrues in practically real time and is useable on 99% of products on Amazon, so it's very normal-person friendly as it doesn't require optimization of habits if you already buy a lot of stuff on the 'zon. Super simple since it just rewards flat dollars, no points or annual thresholds or loyalty programs or...
Also doesn't require the insanely good credit of the Apple card.
Yikes. I know it's just an example, but how often do "normal" people buy TVs?
I gave up videogames because I didn't want to spend so much time in my head like that (I'll still gladly play tabletop games with other people, and even couch-coop videogames if I'm invited too, but I gave away my gaming PC), and I sure don't want to spend time fiddling with credit-card points games. It helps that we're mostly unhooked from "retail therapy" or whatever the term is these days.
What are the costs of cc points games? Who pays in the long run?
A TV specifically? Maybe once a decade. But, what if it's a new computer, or a new couch, or whatever? Substantially more often. Their minimum threshold is only $250, although items are specifically elibile, not automatic. They'll happily do the 12 month deal on a $399 iPad mini, for instance, just to name one thing I spot checked).
I don't believe so. The actual card is managed by Chase, payments go through the Chase website, etc. Amazon just links to it and updates your reward balance nightly.
Note that it's better if you don't apply rewards points at checkout - instead, get a payout to your bank account via the Chase reward redemption portal in the app. If you have $100 in rewards points, and use them in checkout, that $100 doesn't hit your card and you don't get the 5% cashback on that $100.
Technically you don't even need to loop through the bank account, you can also do statement credit. It doesn't count against your minimum payment, but it does count as a credit/payment towards the statement balance.
But yes, always charge the full amount and then handle rewards at a lower layer, never "pay with points".
Sure, to get $100 in rewards you'd need to have spent $2,000. It's not life-changing but $5 is still something, and I imagine Chase/Amazon save >1 million a year from people not doing this.
I hate points. There's always a catch, a term and condition that excludes your desired flight, or a time limit, or a horrible website, or something stupid.
The best points are called dollars and are accepted everywhere, all the time, for any purchase.
> The software is solid and Apple prevents them from reselling your data to third parties.
We will see. The Apple Card is using the Mastercard network. Recent article came out which shows MC does their own internal processing of transaction data for their personal gain.
I have requested my data through the GDPR portal — “My Data”. In theory, there should only be data for my other MC card.
I do agree. It’s a nice card for those that don’t care about the “point warfare” (most programs offer 1-3 cents per dollar spent). Side note, GS is very generous with their credit limits. My limit is reaching almost $60K at this point and I maybe use 10% of it.
The one thing I do dislike about the AC is the support. It’s so bad
I'd bet that this is pretty close to 'everyone' at this point. Haven't we been reading stories on HN recently about how airline points are basically worthless these days? I wouldn't be at all surprised if that were essentially true for all travel-related points.
The privacy policy claims that MasterCard and Goldman do not sell or share transaction data from Apple Card. I’d like clarity on how this differs from any other MasterCard but that is what it says.
> do not share or sell your transaction information to third parties for marketing or advertising.
It's not that they don't sell them. It's that they don't sell them for marketing and advertising. I wonder if Mastercard selling pseudo-anonymous data is covered by this.
That's for the merchant. Merchants only have access to the tokenised card number.
MasterCard and Goldman will surely have access to the actual card number. How would you recon they generate monthly statement otherwise?
Goldman surely has access to the real card number and the statement, but not sure if the Mastercard network has access to that as you would think that information just gets routed back to Goldman.
Google and Apple Pay negotiate a card number of them to use. But, Mastercard and the bank both link those to your account and can tell how you spend. They can even tell the difference between using the physical card and the app.
It is really nice once you give up trying to min/max rewards.
And some of the issues are kind of self inflicted - the "always monthly on the nose" isn't a feature I really need, and I would actually prefer to offset that by a few days, so if they offered that as a feature I'd take advantage of it.
I am very content with my alliant signature visa, as it gives 2.5% on everything, still has an extended-warranty benefit, and has no international transaction fees.
There are a few downsides, specifically (a) no contactless chip in the credit card yet, (b) need to keep $1k on deposit and have at least one monthly deposit of any kind/amount (scheduled ACH for $10) to get the 2.5% rate, otherwise it's 1.5%, (c) minimum redemption $50, and (d) ACH processing is a little slow/awkward, so you probably want to pay a bit ahead of time. And generally the UX is a little rough etc, they are a small credit union and it's not super polished, but it's functional.
But yeah I'm tired of category gimmicks/etc, they are not usually worth it anymore. BOA Signature Visa has 3% on category of choice (online purchases or home improvement being the good ones) but it's only up to $2500 in spend per quarter, and they count the non-choice categories against your total bonus, so using it for gas/groceries costs you from the theoretical maximum of $75 total bonus per quarter. And they charge international transaction fees which completely negate the online purchase bonus for anything denominated in non-USD (at least it's not charging for international transactions in USD anymore). And they really screwed up on a fraud case that took CFPB intervention to fix - it turns out, the price of my dignity is apparently $75 a quarter.
The costco card has 4% on gas, which is good (especially when I had a nearby speedway I could buy beer at), but it doesn't cash out until the next calendar year (so you can wait up to 14 months for points) so I generally don't use that except for the end of the year (I'll wait 3-4 months, I won't wait 14). But I think this is emblematic of the problem - the costco card (and many other store cards) only gives 2% even in the store, so it's worse than the alliant, on top of the onerous cashout process! Even if you have a more typical 2%-on-everything card, the costco card is pretty much strictly worse because of the cashout. I mostly got it for the 2-year extended warranty, that was the value to me, but they dropped that benefit at the start of 2022, so, it's almost useless to me now.
Notionally I could use amex or something and try to make it my primary card I guess, but I'm not a business traveler, and the alliant is just mentally easier. 2.5% on everything if you keep the $1k in the account and set up a recurring monthly $10 ach transfer, done. No international transaction fees, what you see is what you pay (plus or minus actual currency conversion, which is unavoidable). Use it as your primary card and spend $2000 and you'll cross the $50 redemption threshold every month. Is fine.
The Amazon Prime card is also very good, 5% on all amazon purchases is good enough I'll make a special point of it. If you do most of your bigbox purchases there, it adds up quick. They also have very good cash-advance offers, right now it's 4% transfer fee and 2% APY for a year - but the cash advance pays off first, and new purchases continue to accrue interest at the full rate (25% or whatever), so, you want to lock the card while you're doing a cash advance, so you are also foregoing that 5% (really, 2.5% above the alliant) from amazon purchases, but, if you're mature with it, it's great for consolidating other debt or financing things that need to be done in cash.
I'm also an overall satisfied Alliant customer. Definitely the lack of contactless chip is annoying, and I will echo that their UX could use refinement, but otherwise it's a pretty reliable card and the points are simple and easy. Fraud detection is a little hair-trigger I've found, but I have a few backup travel cards so when something unusual gets declined I can use an alternative.
This is completely unsurprising. The way banks make money on consumer credit cards is primarily through interest and fees, which primarily take advantage of people who are not financially literate. They also make intentional dark UX choices to ensure that collecting on fees or interest is much more likely.
Meanwhile, Apple Card had such high eligibility requirements (I got denied the first time I applied and I'm a HENRY tech worker with an 812 credit score) that the vast majority of the customers in the program are exactly the type of people who are high earning and responsible enough with money to pay the card off each month to avoid interest and fees. Apple made it a step further due to the integration into Wallet that allows you to easily track spending and ensure you can trigger payments in a way to avoid interest.
As a consumer, I love Apple Card, because it makes it simple to get base cash back and ensure I never get charged interest. Clearly it's a bad deal for Goldman Sachs, but I don't have any tears to shed for them.
It is mostly older Millenials/Xennials with professional jobs. They earn more than 2x the national median income, but have a net worth that's less than 3x their income or $1M (whichever is larger).
Are the approval rates that harsh? It never seemed that way to me. Anecdote: I applied in 2019 when it first came out, and hadn't had a credit card in several years, and my credit score was, to my knowledge, pretty much shit and non-existent; the only reason I even tried to apply was because I had a good paying job at the time, and it was like 2 button clicks to try it, so I figured "why not, I should probably get one". I got approved for $250/month within 5 minutes and was able to use it via NFC at the store within 5 minutes of that. I was fairly surprised actually.
But you're otherwise spot on. Because I'm an American tech worker, I've never missed a payment the whole time I've had it, or even had to worry about it much. It's been great for my credit score and I've literally paid zero interest on it, ever.
Well, the limit is much higher now, I can tell you that, but that's only because I just never missed a payment for a few years. They expanded my limits pretty quickly. I mostly didn't use credit cards before that when I made less money (and was younger and dumber), so there wasn't much credit history. But then why approve me quickly to me if they only were giving me something that low in the first place?
FWIW, I knew several people who got approved around the same time, but only in the $800-$2000 range. I saw it as no harder or easier to get than an average card, I guess is my point.
It might have been first mover advantage, when it first launched. Or maybe it's one of those things where you can make it over the gate if you're in the far tail ends on the left or right, but if you're just in the middle of the road credit wise, it's easier to get denied? Credit scores and the like are mostly a bullshit mystery, in my opinion.
Your premise makes intuitive sense given what we've heard about Apple Card approval rates, but articles I read in the past indicate the problem is in fact high charge-off (failure to pay) rates:
In my experience, giving a company more business (not to mention, straight up cash!) is seldom an FU :)
The above article is kinda slim on why this is bad for GS but the sense that I got from clicking one link down is that the concrete thing is their 'platform' business has not recouped its investment. As in, they paid a bunch of people, paid for a bunch of integrations, etc and aren't generating sufficient offsetting revenue. Given how cards and accounts work, I suspect the incremental margin on a given CUSTOMER is positive. So yes, I think they would be happy to get the merchant fees off of your increased Credit Card spending and to enjoy the spread between your 4.15% and whatever they invest in which presumably pays more.
Hopefully it's invested in some type of insurance company, and in that case the spread is likely 1%. I would think the investment would have to be a guaranteed return.
Not sure why that's "hopefully" - if you like getting the rate GS pays you, you want it to be sustainable for them and therefore for you.
In practice - I forget the details - but it works in the other direction. The bank sets the rate it pays YOU based on a combination of what it can make elsewhere and how badly they want to get your money to fund that investment. Unless GS is somehow forced by their deal with Apple to pay out more than they can make (I see no evidence of that in the article) you'd expect this is how they operate.
I don't think it's an FU to them. You can get a much better rate than 4.15% right now, which means they are just using your money to buy those things to the maximum extent possible. Shop around.
If you don't want to deal with some random bank and their crazy password requirements, you can probably buy CDs through your ordinary brokerage account.
Finally, if you want to FU a bank, depositing your money there isn't the best way to do that. Start spreading rumors that Apple Card savings is about to be insolvent and get everyone to withdraw their money. That they hate. Ask Silicon Valley Bank.
> Start spreading rumors that Apple Card savings is about to be insolvent and get everyone to withdraw their money. That they hate. Ask Silicon Valley Bank.
You haven't stated, but seem to imply that the stated rumors would not be founded at the time they start being spread. I'm not a lawyer, but spreading unfounded rumors for any purpose (much less with the intent to cause financial harm) seems unwise.
Disclaimer: left Goldman a couple years ago. My GS holdings are a rounding error in my portfolio.
Goldman sach's other savings account, Marcus by goldman sachs gives you 4.40% right now.
Depending on the deal with apple, the 4.15% through apple could be worse for GS, but it would also be worse for you. (Not to mention, treasuries are over 5% and don't incur state income tax)
Weirdly, their standalone savings offering through Marcus is offering 4.40%. I don't know why the Apple Savings is not competitive. When Apple Savings was first released it was slightly higher than Marcus (for about a month, then Marcus changed to match).
Beating investment bankers in their own game must feel amazing :) Maybe board should lower the teams that made the decision. How hard it can be create a model and calculate. Apple is better at Finance than GS.
Who is "beating" someone here? In adult reality, Apple are likely "concerned" rather than "feel amazing" if this isn't sustainable for their strategic partner. If your wife is miserable, you'd be dumb to think "I am better at marriage than she is" because eventually it's going to end.
Also. Businesses make bets. GS made a bet on consumer finance and on this deal in particular. You hope that every bet will work out, you know some won't and that's fine as long as you have more wins than losses. GS seems fine holistically so seems like they are taking a calculated amount of risk.
Are we talking about GS that has direct access to money printer and cheaper credit so they have certain revenue and profit no matter what? In the other hand, Apple creates hardware and software with real world risk. Supply chain risk etc. They are not like they can just manipulate markets to make billions for their staff. That game.
// Are we talking about GS that has direct access to money printer and cheaper credit so they have certain revenue and profit no matter what?
Not sure your overall point but sounds like you're somehow processing the world through both "it's physically impossible for GS to lose money" and "they lost money haha" lens without realizing those things are at odds and one mustn't be true.
Net income can be volatile, just like the stock market? They can never go out of business with direct money printer support. They have very minimal risk compared to even lower banks. That privilege applies to very few at top. Whether people realize it or not. After Lehman, things changed. Apple makes their profit with actually creating products and innovation. GS no.
> GS that has direct access to money printer and cheaper credit so they have certain revenue and profit no matter what?
I read that to mean they can decide the revenue/profit, but now I think you meant that they have a certain minimum amount of revenue/profit due to government subsidy, which is probably true.
Do you understand that they have certain other ways to make more money so this deal which they agreed and calculated, is just part of doing business? And their business at top is protected like few other top institution. So they can make mistakes and then ask the unlimited printer brrrr
Just a lower level of accountability, no matter what. Compared to risks they decíde and keep.
The UI and the repayment scheme for that cards' promotions and servicing is ridiculously confusing. I ended up in arrears due to Goldmans shitty servicing methods and had no idea how until I contacted customer service. I had been making larger than required payments and could not fathom why my card was being disabled.
These guys should have brought people in who know what they are doing. Instead it looks like they clumsily let Apple dictate some requirements and were not able to guide product development properly due to their own inexperience.
Blind leading the blind.
I have familiarity with another payment product Apple launched with another shaky partner. The problems there were mostly technical though, since the company had vast servicing experience and could competently guide that part of product development.
Apple really should create a consumer Fintech division that can do implementation. They might be steering clear of that due to the GE case study. They don't need to be or own a bank but their presence and size would likely be an outsized portion of the business in most banks that would take them on as a partner.
Setting up a bank and running a consumer facing product (Fintech) are two different projects altogether. Two different modules, if you will.
I also witnessed MasterCard falter when entering a consumer market they had not played in before. Very ugly.
I think Apple keeps approaching perceived industry leaders and keeps getting bad advice. A better choice might be to recruit talent from smaller Fintechs where the people are intimate with the real world challenges and turn them loose.
I'm not sure what's confusing about the Apple Card's payment screen? It's a dial with clear markings for how much interest you'll pay at various points, and it strongly encourages paying off the balance so you'll pay zero interest.
The UI is, IMO, the best part of the service. It's lightyears beyond every other card I've used.
> I also witnessed MasterCard falter when entering a consumer market they had not played in before. Very ugly.
not sure if this is what you're thinking of, but it's been crazy to think of all the payment-processor systems the CC networks have launched that have tried and failed to compete with paypal. I swear every 3-4 years we have some new thing from mastercard or visa, they do a bunch of promos at newegg/etc where you can get $10/$20 off if you sign up for an account/etc, and then after the promo funding dries up they just wither away to dust. I swear this has happened at least 3-4 times now.
Goldman played the tech startup game to launch its consumer banking division and is now finding out what happens when there aren't any VCs or retail investors to pass the bag to. They poured billions into user acquisition and signing sweetheart deals with companies like Apple without caring about how they will eventually make a profit. But surely they will make up for it in volume right?
Would have been so much easier if they bought a smaller fully-operational bank and rebranded it.
How exactly is Goldman Sachs losing $1-2B here compared to regular consumer banks, which don’t? The article mentions having to deal with all accounts having monthly close on the same day, but it can’t be the whole reason.
"This is completely unsurprising. The way banks make money on consumer credit cards is primarily through interest and fees, which primarily take advantage of people who are not financially literate. They also take intentional dark UX choices to ensure that collecting on fees or interest is much more likely.
Meanwhile, Apple Card had such high eligibility requirements (I got denied the first time I replied and I'm a HENRY tech worker with an 812 credit score) that the vast majority of the customers in the program are exactly the type of people who are high earning and responsible enough with money to pay the card off each month to avoid interest and fees. Apple made it a step further due to the integration into Wallet that allows you to easily track spending and ensure you can trigger payments in a way to avoid interest.
As a consumer, I love Apple Card, because it makes it simple to get base cash back and ensure I never get charged interest. Clearly it's a bad deal for Goldman Sachs, but I don't have any tears to shed for them."
Can’t really believe the $1-2B figure. I would guess this figure is inflated and the real problem is that GS is unhappy with something in the current arrangement and they are publicly signaling so to Apple.
I had an Apple Card for two months. It was the worst card I've ever used. It was rejected for ~5% of all transactions, randomly, online and in person, always with error codes no one could diagnose or correct. All I could do was call Goldman Sachs, who would tell me to try swiping it again, huh, that should have worked, we don't see any record of a transaction ever being attempted, and after half an hour with them they would tell me to call Apple and after an hour on the phone with Apple they would tell me it was Goldman Sachs' fault. I had more rejected transactions with my Apple Card than with every other debit/credit card I've ever had in the previous twenty years combined. Total crap, and completely incompetent, irresponsible "support". I cancelled it and went back to my bank cards.
Apple could just start their own bank. Apple’s wealth, power, and brand allure should alleviate some of your concerns. They will find a willing partner who will uphold their offering.
The amount of red tape involved to become a fully regulated bank will make even a “trillion” dollar company bend the knee.
There’s a reason why tech companies partner with well established banks in the first place. To avoid the headache involved with day to day operations of a bank.
GS leveraged their reputation and greased the regulators to get into the consumer bank business. Now they are paying the price.
Maybe Apple would be a decent bank. But at the same time I don’t want to discuss my financial details with a random Apple Store employee. Lol
On the other hand, Apple already has a direct relationship with Green Dot Bank for Apple Cash, and Green Dot is an expert in this field of running consumer accounts for tech companies. The only issue with Green Dot is they don't offer HYSA accounts, as far as I can tell (Wealthfront only uses Green Dot for Checking account features and money is swept between their actual HYSA and Green Dot to provide these checking account features).
> These features [...] led other banks with established consumer credit card operations including Apple's long time partner Barclays, along with Citigroup, JPMorgan Chase and Synchrony, to turn down Apple's proposal. Goldman Sachs defended the terms of the deal saying they were "thrilled" with the partnership and seeking "to disrupt consumer finance by putting the customer first."
so it was hard enough to find a willing partner in the first place, and seeing the trouble Goldman Sachs has with it is not really likely to entice others to jump in...
Banks are not good businesses for a shareholder. When a bank is in trouble the shareholder tends to be zeroed to protect deposits. PE ratios for bank stocks tend to be bad.
You have a lot more leverage being a big client of a bank than its shareholder. The pecking order is roughly big client > senior management ~ shareholder > other senior employees > smallish client > junior corporate employee > retail client ~ teller.
I looked into this - Apple actually only has $62B in equity in their business - $332B in assets and $270B in liabilities. [valustox.com/AAPL]
GS is worth $100B and has $116B in equity. [valustox.com/GS]
Of course, Apple has a market cap of 2.8T and could buy GS 28 times over using shares, but that involves diluting shareholders to fund this new venture.
On the other hand, that might be a great new revenue driver for Apple since everyone already has a phone - I bet they could be a bigger, better bank than the big banks. Even JP Morgan, the biggest US bank, has a market cap of $435B [valustox.com/JPM].
Yeah, and GS is the perfectly wrong bank for them to buy as it's really just an investment bank.
But all this muttering sounds like we're going to see GS buy a tiny bank, saddle it with the consumer business (e.g, Apple Card and savings) and then sell that bank to Apple.
I wonder if "owns an Apple device" is enough to count as a group for a credit union ... :D
There is no purpose to GS buying a tiny bank, they already have all the licenses and regulatory requirements and liability exposure. And they opened to retail customers 7 years ago:
What motivation would Apple have to buying a bank and exposing itself to all that extra regulation and liability? Apple will just move on to the next best offer they get from a bank for a cobranded credit card, like any other retailer.
Accounting measures aside, have you ever heard anyone express positive sentiment toward GS? They have negative (colloquial) goodwill in my book, although I'm definitely highly influenced by Buffett's summary of his experiences with them.
- investors think their assets are not worth the sticker price
- looming lawsuit acts like a liability but may not show up on the books yet (see Hawaiian Energy - Hawaii wildfires - valustox.com/HE and Verizon - lead cables - valustox.com/VZ)
- investors expect a lower profits, which sort of translates into being equivalent to their assets being worth less.
Some companies, like banks, have vast assets, vast liabilities, and moderate earning power. Tech companies have almost no assets, but huge earning power - because the real asset is arranging engineers in a certain way, and that's hard to measure on a balance sheet.
>They will find a willing partner who will uphold their offering.
I don't think people quite understand what is on offer. And precisely why no bank wanted to work with Apple apart from Goldman, which has zero retail banking experience.
>Apple could just start their own bank.
It is not like Apple owning a bank could do without all the banking regulation. The whole reason why Apple didn't start their own payment network ( Visa / Master ) or their own Bank ( Goldman ) was because they dont want the risk, but want all the benefits.
> Goldman, which has zero retail banking experience.
Goldman runs Marcus, an online only HYSA. The interest rates for that and for Apple Savings (which they also run) are close, but not the same. It's weird.
above and beyond the existence of a savings account with a reasonable APY, what i like most about the apple card/savings situation is that interacting with the bank itself is entirely abstracted away yet i still get all the backing guarantees of a real bank, like FDIC insurance. I just don’t have to deal with their {paperwork, inevitably insufferable app, …}.
This article is interesting because it is claiming Goldman is hating on its consumer businesses, but meanwhile its Marcus division seems to be doing well. I use it for both savings and loans and it is very convenient, and they are pretty aggressive in marketing it.
Is it really all consumer facing activity, or just the Apple portion?
Interesting. The APY on savings accounts is only 4.15%. The spread between that and short term T bills is over 1%. My main HYSA is paying me 5.30% APY currently, and they aren’t complaining. A 1-1.5% spread on customer cash should be celebrated by GS…
Knowing that it's costing Goldman billions of dollars is a really strong selling point for the Apple savings account. Apple should consider just putting that in an ad.
It’s a bank account, not a home. You can switch in maybe 30 mins of work if you want to go to a different mainstream bank and 1 hr of work split over two days if you have an esoteric bank.
Switched my wife off this two weeks ago into our shared HYSA.
Maybe it works differently where you are from, but here (EU) there's usually a bunch of companies taking money out of your account via SEPA or transferring money to your account (salary).
This is usually rent, power, water companies etc. so it's not that quick to switch as you'll have to update your bank credentials everywhere. Depending on how much you use the account that might be a lot of work and it's not "30 minutes of work".
In the US most things are best paid with a credit card except for the biggest costs because it’s considered a liability to spread bank account info around too much (banks generally aren’t too helpful when a breach occurs, whereas credit card companies will happily wipe away fraudulent charges), plus you’re missing out on points.
The only thing I had to change over when switching checking and savings to a different bank was which checking account my mortgage payments were getting pulled from.
American here. Almost all of my monthly payments for utilities, mortgage, daycare, car payment, etc...those are all direct funds transfers. Using a credit card would be too expensive for those. Some payments only occur via credit card (internet service, and until recently, T-mobile cell phone service, though they now accept direct fund transfer for that).
If I changed bank accounts, I'd have to untangle a bunch of monthly bills to a new account.
Fair. I don't have a car payment or children at this point which are the two big other costs where credit cards definitely don't make sense.
A bit surprised on utilities though. Nowhere I've lived on the west coast has charged a service fee for paying electric, gas, water, phone, etc with a credit card.
Even PSE doesn't fee it. I guess why I bothered with checking account is that my credit cards expire far more often than I change bank accounts, I had a nasty fee once from Comcast because I didn't update my auto pay credit card in time.
The person you're replying to is meaning how savings accounts work in the US. You put money in them and let it sit, earning interest. Changing savings account banks is quite easy.
Checking (or "demand") accounts work like you describe and people are slower to switch them for that reason.
It is not normal here to have direct debits from savings accounts. That is what a checking account is for. Since Apple does not have a checking account, most Apple Card/HYSA users have a regular bank account somewhere else already. That's where the debits would be happening, so moving the money from one HYSA to another is low impact.
And as someone else mentioned, it's pretty common not to use debit at all. I use my Apple Card for all my utilities in addition to all my regular purchases. I can move money from my checking account over to my Apple card/HYSA in a couple seconds, so it works out pretty conveniently.
In Europe I have zero reason to even get a credit card: all bank accounts have an IBAN number, and works with every other bank that is part of the EU banking system. including any online ordering I need to do.
Why would I sign up for a system that hands my money over to a US bank, no matter how much they lose on that deal.
Certainly. In our case we were simply consolidating finances, so we got a joint HYSA. The bank account we used was with UFB Direct which is a neobank backed by Axos Bank. They've got the usual FDIC coverage and stuff. The reasons I went with them:
1. 5.25% interest rate
2. Can pay cheques out of the HYSA (some x times / month I think, but it didn't matter because my target was 1 time).
Effectively, that means I don't need to pay rent out of a different account. I can leave the HYSA in place and set my rent cheques to go out of there. This means I can run pretty lean on my other accounts. I only have to cover the credit card bills.
The interest rates they're providing also make total sense considering current rates: they have to be rolling short-term treasuries and skimming the spread. Seems fine to me for a HYSA.
Same. I prefer my Apple Card to all previous cards I’ve had and it’s heartening to hear that it’s screwing over bankers.
The move going forward IMO for anyone building anything, is to use the tools of capitalism, against itself, to make profit and rent seeking favor transferring capital to labor and consumers over returns on capital.
Honestly, I feel like this is another bi-product of 0% interest rates for so long. Bankers have essentially stopped caring at all about deposit amounts. Many banks still offer 0.x% interest even with most T-bills paying 5%+. It is an odd position from something that should be easy business, receive billions in deposits, invest in 6 month T-bills, carve off 0.5-1% of the profit amount for yourself, profit?
I'm convinced this is less about them actually losing money and more about them having sour grapes about not making 100x or something. Like the credit card is losing money when it is immensely popular and charges like 18% interest, HOW?
> Bigger banks are simply betting that people will not go through the trouble of moving their money.
This applies even at smaller banks that don't make savings account their primary product.
Like, my credit union offers 0.1 - 0.9% savings accounts depending on your balance. With a $250,000 balance, you qualify for some Premier savings account with 4.8%.
I said screw it. I created an account somewhere else that gives over 5%. Yeah, it means my money might take a couple days for me to get if it I absolutely need it, but I can't imagine a scenario where that would be a problem that my credit card can't take care of.
If Apple took on more of this business themselves then equity markets would probably see it as a bad sign, yes? I recall that conglomerates have a bit of a bad rap. Also, if GS is struggling with this business then it would probably be even more difficult for a computer company, yes?
From what I've read GS's entire consumer division has been a giant money pit. They accumulated an impressive about of loans in a very short time, but haven't turned a profit after sinking hundreds of millions into development and acquisitions.
GS is not a consumer bank, and they're trying to play as a consumer bank, and they didn't just buy a consumer bank.
You don't know what you don't know until you try, and they got burned.
I'm sure that they always have done "consumer bank-like stuff" but it's more like a favor to their big customers than an actual business, kind of like when a business that doesn't offer delivery will still drive stuff over to the owner's house.
And someone sold someone the bill of goods that Apple customers are "so perfect" and "high value" that the customer service will be absolutely minimal ...
Apple is always "the hot girl in the relationship". They are giving you the opportunity to be a supplier to apple, with massive volume, and they expect cut-throat pricing, a high level of QC (no chinese factory fuck-fuck games with "impromptu cost reduction"), and absolute supply-chain reliability. It is just like Walmart and Costco, they are big enough that they can dictate the terms of the relationship, and they do so aggressively. And just like walmart, in the long term this can mean that you have a single monopsony buyer who dominates your business and can ratchet you down even more over time.
goldman didn't realize what they were getting into here, they figured they could put one over on Tim Apple and no, the fruit company always comes out on top.
on top of that, apple really also kinda has a track record of using their market power to go to bat for consumers (app review/permissioning being one example, also user-privacy on MDM'd apple devices in the quasi-workplace being a focus, etc). And in this case they set up a bunch of terms that tend to reduce the fee stream that CC providers normally extract, pay the rewards daily, etc. Apple undoubtedly knew exactly what they were negotiating for etc, and goldman didn't realize how much those things were going to cost them (in lost fees).
So yeah, goldman thought they were the big man on campus and apple took them to the cleaners.
The issue as stated in the article that I'm pretty sure nobody actually read, is that consumer finance is a logistical nightmare they wernt prepared for. It had nothing to do with Apple.
The software is solid and Apple prevents them from reselling your data to third parties. The cash back is super easy to use and visible (and the extra percentage on Apple purchases is a nice bonus).
I have some cards I use for perks (Amex Plat/Gold, United Club, used to have Chase Sapphire Reserve) but I used the Apple Card as my sole card for a while and I kind of miss the simplicity of it. With Amex I feel like I'm fighting against an Army of Amex employees trying to make it as hard as possible for me to use the card's perks where as with Apple I feel like they're genuinely trying to make the software usable for me, the incentives are more aligned.
Every time I have to use Amex's site to 'enable' a perk and then read the fine print to make sure I actually get the benefit it makes me angry at some invisible product manager that hates customers.