Apple has transformed many aspects of our lives from the way we communicate, to the way we listen to music, to the way we access information.  Now, they are aiming to change the way we finance our lives with the “Apple card”, Apple’s newly introduced credit card. Apple already made a move into the finance and payment space with the launch of Apple pay in 2014.  Now they have introduced a credit card which Apple claims is a game-changer in the credit card business.

Apple is marketing the Apple card as being a more responsible type of credit card, which, encourages consumers to pay less interest and fees, keep track of spending categories, improve security, all while earning cash rewards.

In this article, we’ll look at the key features of the Apple card and see how it is, and isn’t, different than a conventional rewards credit card. Apple claims that their card “completely rethinks everything about the credit card”.  Let’s see if that is true.

WHAT IS THE APPLE CARD?

Apple card is a credit card that will be available to iPhone users this summer.  The credit card works in conjunction with Apple pay, Apple’s cardless payment modality.  In addition to being used with Apple pay, Apple will issue a physical titanium card to be used where Apple pay is not currently accepted.  As we will see later, the rewards are not as good when using the physical card, so Apple intends for Apple card to be used primarily as a virtual card.  

PRIVACY AND SECURITY

Apple has a strong reputation of promoting security and privacy, so it’s no surprise that Apple is marketing the Apple card as a much more secure way to make payments, compared to a traditional credit card.  

Since it works through Apple pay, the Apple card has an added layer of security because of two factor authentication, by using Face ID or Touch ID with each transaction.  The actual credit card number is stored securely on your iPhone and is not even printed on the physical card, only the cardholder’s name is printed on the credit card. There is no signature, expiration date, or CVV on the card either.  This theoretically makes the physical card more secure and places an obstacle in the way of a thief trying to make an unauthorized online purchase.

Apple has also stated that due to the architecture of the Apple pay system, even Apple can’t track how much you spend and where you spend it.  That information is only available to you through the Wallet app on the iPhone. The Wallet app will also give real-time fraud alerts through your iPhone if suspicious activity is detected.

Additionally, Apple has struck a privacy deal with Goldman Sachs, the underlying bank for the Apple card.  Goldman Sachs has agreed that it will not sell or share any personal data to third parties for marketing or advertising.   Selling your information is a common way that credit card companies make money off of their customers.

FEES AND INTEREST RATES

The Apple card is marketed as a no-fee, and low interest rate card.  There is no annual fee, no late payment fee, and no fee if you go over your credit limit.  But don’t forget that although there is no “fee”, interest will still be charged on late payments. Apple seems to be trying to influence the industry and drive the norm toward a no-fee structure.

According to Apple’s website, the variable APR for the Apple card ranges from 13.24% – 24.24%.  This is a fairly wide range of interest rates, which means the card could be a good deal for the most highly qualified applicants, but much more expensive for those with poor credit.

REWARDS

The reward structure of the Apple card is similar to that of other cash-back credit cards.  Apple will offer rewards of:

  • 3% cash back on anything bought from Apple
  • 2% cash back on anything you buy using Apple pay
  • 1% cash back on any purchases made NOT using Apple pay (if you use the physical card)

The cash back rewards are given to you daily instead of monthly, and the money goes onto your Apple cash card within your Wallet app. It can be used right away for purchases, or can be transferred to a bank account.  

These rewards are nothing too special for a cash-back card.  These are more-or-less typical reward percentages and don’t make any great strides in rewards competition with other credit card companies.

MONEY MANAGEMENT

The Wallet app makes it easy for you to track your weekly or monthly spending in a number of different categories.  This can help identify areas where you maybe overspending and could be a way to help consumers stick to a monthly budget.  But it appears that this will just be a way to monitor spending and will be a far cry from a comprehensive budgeting app.

Apple card also has a feature that allows you to see how your payments will affect how much interest you pay.  This appears to be mostly an educational tool to help the consumer understand how their payments and their interest charges are related.  By not emphasizing just the minimum payment , the goal is to help Apple card customers pay less interest, by motivating them to pay more of their revolving balance.

CONCLUSION

Overall, the Apple card appears to be not very different from a typical co-branded rewards credit card.  But Apple does take some important steps to improve the ecosystem of the credit card industry through the no-fee structure, increased payment security, and the promotion of responsible credit card use.

The cardholder agreement, where all the important details are laid out, has not yet been released by Apple.  So it is too soon to comment on how the Apple card will really stack up with its competition. In any case, it will be interesting to see if Apple can have the same game changing impact on our finances as it has had on so many other aspects of our everyday lives.

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