Report: Apple and Goldman Sachs are breaking up over money-losing Apple Card
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Jakelshark
Ars Scholae Palatinae
I've had an Apple Card for a few years and use it for some small purchases and to buy Apple products. $200-400 a month or so.
I don't think I've paid a single cent in interest, while getting a few hundred dollars in cash back and enjoying the 0% interest payment plan for Apple devices.
I really like how easy it is to pay the card off every month. It's probably too good at reminding you to pay it off before it charges interest
I don't think I've paid a single cent in interest, while getting a few hundred dollars in cash back and enjoying the 0% interest payment plan for Apple devices.
I really like how easy it is to pay the card off every month. It's probably too good at reminding you to pay it off before it charges interest
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With the customer profile, it doesn't seem like the sort of business American Express would really want to get into. American Express generally assumes that people won't run balances, or at least they'll pay them back.
Honestly, of any of the players, Discover would seem like the most logical choice for a product like this--although Discover is so small Apple could eat the whole company and make them their financial services division, which would honestly make a fair amount of sense if that's the move they're going to make.
Honestly, of any of the players, Discover would seem like the most logical choice for a product like this--although Discover is so small Apple could eat the whole company and make them their financial services division, which would honestly make a fair amount of sense if that's the move they're going to make.
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"people with Goldman-backed credit cards like the Apple Card are actually making their payments less often than people with credit cards from other banks"
is the article saying that Apple card customers are defaulting more often (paying less often) or that Apple card customers are paying off their balances MORE often than others, causing the Goldman Sachs losses?
is the article saying that Apple card customers are defaulting more often (paying less often) or that Apple card customers are paying off their balances MORE often than others, causing the Goldman Sachs losses?
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One of the things that I like about the Apple Card is that, when you go to pay at the end of the month (and I kind of love that it's always then, because it's so much easier to remember), there's a circular slide that shows you how much you'll owe if you pay less than the full balance.
I'm also wondering if Apple can't just create its own bank. It's got about $162 billion in cash.
I'm also wondering if Apple can't just create its own bank. It's got about $162 billion in cash.
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I would have assumed the latter, but from the linked CNBC article, it's actually the former.
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Apple's gonna have a hard time finding another corporate oligarch who is willing to NOT harvest every bit of data they can from its userbase.
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I have read elsewhere that it is both; a doughnut problem. Deadbeats, an industry term, at the upper end (that pay off each month, and people that default due to easy access to credit. The middle portion that keeps a regular balance is missing/less than average is the problem.
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What this means is that Goldman isn't doing adequate checking on the people they're issuing cards to to ensure that they're able to actually make payments. That's across the board, not just Apple cards - they're giving credit cards to people who are defaulting on them.
Since the credit card game that banks play is to try to find the people who will float a balance (so they get interest payments) but not default (because then they lose money) this means that Goldman isn't putting in the effort to screen potential cardholders as well as the other banks are.
If they're actually losing money that has to be people defaulting. They make money on transaction fees from the retailers, so folks who pay off their credit cards every month don't cost the bank money or pile up losses, they just generate less money (and are less preferred as customers) to folks who float a balance but make regular payments.
The way to actually take losses in the credit card industry is to have people just not pay you after taking the money.
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I've had an Apple Card for a few years and use it for some small purchases and to buy Apple products. $200-400 a month or so.
I don't think I've paid a single cent in interest, while getting a few hundred dollars in cash back and enjoying the 0% interest payment plan for Apple devices.
I really like how easy it is to pay the card off every month. It's probably too good at reminding you to pay it off before it charges interest
Exactly the same thought I had. The Apple Card was:
- easy to apply for (just done within the Apple wallet app)
- easy to monitor (transactions and balances right there in the wallet app)
- easy to pay off (defaulted to paying off in full every month)
So I put a few small recurring bills on it like Pandora radio and iCloud storage, and I can use it to spend a bit here and there. It has been super convenient for us to use occasionally and I've not yet had to pay interest.
Whenever I look at it vs. checking balances on the other credit cards' apps, I'm struck by how much easier it is to use and pay off than navigating through the overdesigned, clunkier apps for the other two cards we have. Judging by what Goldman is saying here, though, that's probably the point.
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Ownership of an Apple products is not an indicium of creditworthiness. If most applicants get the card, then the you are likely to self-select into a riskier credit pool.
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I love the card and the savings account--I spend roughly $4K on it a month, always pay it off, and have socked money into the savings account. It's easy to manage and has been a delight--I'll certainly miss it if it doesn't continue.
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As a moderate credit card rewards chaser, the 2% back on all Apple Pay purchases is pretty clutch for purchases that don't fall under the specific categories with higher cash back on other cards.I've had an Apple Card for a few years and use it for some small purchases and to buy Apple products. $200-400 a month or so.
I don't think I've paid a single cent in interest, while getting a few hundred dollars in cash back and enjoying the 0% interest payment plan for Apple devices.
I really like how easy it is to pay the card off every month. It's probably too good at reminding you to pay it off before it charges interest
The downside I realized recently is it doesn't have any included purchase protection, namely the extra year of warranty coverage that I get with my Visa Signature cards. When I recently bought a new MacBook, I used my Apple Card to get the 2% back, then regretted it when I realized I won't get any extended warranty coverage from that card.
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I do wonder if the kind of person who would get an Apple card with the intent to purchase Apple products might not be the most financially disciplined, or may not already have a card that offers comparable rewards that requires better credit history. I could get 5% back on an iPhone simply by buying it unlocked on Amazon, or 3% using any number of cards with Paypal cash back.
Either way, Goldman Sachs fumbled majorly on this - it's usually a good problem to have that people are keeping balances, but that didn't seem to be sufficient for the bottom line. Credit cards are a brutally hard business, though. I once talked to some folks at one of the newer credit card brands, and they told me that they expect negative margins from most customers until around year 3-4.
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That makes a ton of sense, but in general it seems a bit absurd to create an entire financial industry based on "you can pay some of your debs but not all, so we can charge you more". Esp with super high credit card rates these days, it seems like it would forcibly push people out of that segment regardless.
(Carrying a balance on a credit card is arguably one of the worst things to do financially if you can at all avoid it).
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So if they can't find a backer, I assume they'll pay off everyone's balance? Just kidding.
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It was always a little strange to me that Apple themselves didn't provide the service, with no partner. They have vast sums of cash and already run Apple Pay, why do they need a banking partner?
Maybe they knew the risk was high and wanted a bank to take the hit.
Maybe they knew the risk was high and wanted a bank to take the hit.
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In a previous article I read they were not making any money because Apple Card owners were indeed paying the balance off every month. I am still looking for that article. I will update this post if I find it.
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Credit card compliance is hard. If you can get someone else who wants to do it, why do it in house?
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I've had the Apple Goldman card for over four years now. in 48 months of use, I've floated a blanace from one month to the other maybe twice, for a total of less than $50 in interest payments.
But in that same time, I have, according to the Apple Card app, earned $378 in Daily Cash disbursements and nearly $1k in using the high-yield savings account that debuted in April of this year.
So doughnut problem indeed. If I'm like the mean apple card holder, I don't float a balance very often, I constantly pay off my balance, and I'm earning quite a bit of money from Daily Cash + Interest on my savings account.
I've heard GS complain about the deluge of calls they receive every month. I think that's just cover for the fact that they aren't making as much from interest on each cardholder. I've only ever had to contact GS once and that was for the savings account.
The card has really become the centerpiece of my finances and helped me become more financially responsible + aware of how to properly use credit! I hope this change won't affect how I use it.
But in that same time, I have, according to the Apple Card app, earned $378 in Daily Cash disbursements and nearly $1k in using the high-yield savings account that debuted in April of this year.
So doughnut problem indeed. If I'm like the mean apple card holder, I don't float a balance very often, I constantly pay off my balance, and I'm earning quite a bit of money from Daily Cash + Interest on my savings account.
I've heard GS complain about the deluge of calls they receive every month. I think that's just cover for the fact that they aren't making as much from interest on each cardholder. I've only ever had to contact GS once and that was for the savings account.
The card has really become the centerpiece of my finances and helped me become more financially responsible + aware of how to properly use credit! I hope this change won't affect how I use it.
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Defaulting means not paying. If they're making regular payments on balances due or paying off the balances every month, I don't think "defaulting" would be the right way to describe that behavior.
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That hasn't been the case for a while. Amex these days has a number of Blue cards, Delta/Hilton/Marriott, Everyday that are fine with balance or even expect one. They also give cashback and some have no fees (versus some with higher cashback having $95 annual fees).
Amex probably would have an issue with being forced to approve "most who apply" though as traditionally for balance-carrying cards they wanted customers with higher credit score.
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American Express won't want to touch this client market. Nor are they Visa or Mastercard levels of acceptance. There's a reason why retailers don't accept American Express. Capital One would be the only large enough and crazy enough to try. Which i hope they don't. Apple need to change the terms drastically for anyone to sign up i'd hope. If Goldman took this much of a beating and was wiling to just say screw it we're out and will probably take another billion loss next year. I don't think any current financial group will do it.
But in the Sarcasm department. Elon Musk could save Apple. I hear X wants to get into banking
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One of the reasons I use the Apple card is because it's a MasterCard. If it changes to something not accepted widely, I'm out.
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Apple would love to get into the banking business (I'm guessing) but that would make for such a mess of legal obstacles I'm guessing their legal team has directed them to stay away
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I'm assuming it's because, for all the hubris corporate level people can exhibit, Apple execs are smart enough to know they have no clue how to run a bank successfully. It's a completely different world, completely different systems, and much stronger regulatory requirements with country specific non-trivial variations that need to be adhered too. And to build all of that at scale within a year? Madness.
Even if you use the 'financial services' moniker and avoid the full rigour of opening a bank, your risk to reputation is high, the barrier to entry is high, and making enough money at it is pretty hard, especially if you're trying to appease stockholders who think 25% growth per year is normal.
And finally, does Apple really want to give the SEC/FTC/other government auditing groups another reason to go sniffing around the business?
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I have no clue what went on at Goldman, but it's worth noting that it's perfectly possible to run a profitable credit card business that does not make money on interest.
Many Amex cards don't even let you carry a balance, and I can assure you that American Express absolutely still makes money off of those products.
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Remember when it seemed like every retailer had their own financial arm - GE capital, GM finance, BestBuy, Sears, etc etc...
I wonder why Apple just doesn't write Sachs a check to keep them happy?
I wonder why Apple just doesn't write Sachs a check to keep them happy?
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Moreover, they probably don’t WANT to be a bank. If anything, they’d probably buy a company that does this and then spin it off. Or any of a number ofsimilar structures where stockholders get partial stock in the new enterprise, but it’s run as a separate company, with no direct ties to Apple (except a guaranteed contract to perform these services).
Aside from antitrust concerns of owning the credit-> rewards on Apple gear -> only apply for credit on Apple gear pipeline, there’s a LOT of bank compliance regulation. Owning it is inherently more of a hassle than outsourcing to those who know how to do it already.
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Sure, but their interest in credit cards suggests they'd like to be and they have more than enough capital. Even just running something like Apple-Pay-Later would probably bring in revenue.
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Because they'd be subject to all of the strict regulation that entails.
It's much easier to partner with a bank that already has that handled and you can also get name brand recognition for your financial produts with that bank. With Apple the latter part might not be that attractive, but the Goldman Sachs name might still sway people to get it just because it's got a lot of financial brand cachet.
Though less so now apparently after the push to consumer finance seems to have gone very poorly overall.
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The bank doesn't lose money when you pay your credit card off right away. They make around 2% on every dollar you spend on the card, regardless of the monthly interest.
It's easier than it should be to get the Apple Pay card, so people are defaulting more. And on top of that, the interest rate is lower than typical consumer credit cards, so the bank can't even charge high enough interest to mitigate the risk. (That's the real reason credit card interest is typically something like 25-29%: because so many people default.)
A company that doesn't normally do banking can't just decide to start loaning money and act like a bank. They have to be chartered as a bank, and that is a big deal. This is why, every time you get a store branded credit card, that card is actually backed by a regular bank - usually Chase or Synergy, these days.
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Yeah, it's not likely goldman sachs lost billions on a deal (just more PR media bullshit about "poor big business deserves more tax breaks and handouts"). But in case it were true, I have difficulty thinking of a better business to have it happen to. Made my day to hear it, hoping it's true.
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CC's are essentially an income redistribution from the poor to the (relatively) rich. The more sophisticated users are almost always a net loss for the company.
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It's the former.
"making their payments less often than people with credit cards from other banks"
Not sure how this can be read the other way?
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How is this different than any other credit card? If you pay your bill each month, no interest charges. Virtually every card offers some sort of cash back or miles or whatever. This just seems like another credit card to me.I've had an Apple Card for a few years and use it for some small purchases and to buy Apple products. $200-400 a month or so.
I don't think I've paid a single cent in interest, while getting a few hundred dollars in cash back and enjoying the 0% interest payment plan for Apple devices.
I really like how easy it is to pay the card off every month. It's probably too good at reminding you to pay it off before it charges interest
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Apple: Lets get rid of all the dark patterns around credit cards.I've had an Apple Card for a few years and use it for some small purchases and to buy Apple products. $200-400 a month or so.
I don't think I've paid a single cent in interest, while getting a few hundred dollars in cash back and enjoying the 0% interest payment plan for Apple devices.
I really like how easy it is to pay the card off every month. It's probably too good at reminding you to pay it off before it charges interest
Goldman: Actually, the dark patterns are what make us all our money.
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