Middle Age Miles

Apple Card: Is It Good for Anyone?

apple card review analysis is it good for anyone goldman sachs
Apple Card – Mastercard issued by Goldman Sachs [all images courtesy Apple]


Yesterday, Apple introduced its new Apple Card, coming sometime this summer. This new credit card is issued by Goldman Sachs and will run on the Mastercard payment network.

As with most things Apple, the Apple Card was introduced to much fanfare and has received a ton of coverage. Tech types have generally reported positively on the card, while points-and-miles bloggers have universally panned it.

We wanted to take a closer look to see if the new Apple Card is good for anyone. We’ll break down our analysis by groups of people:

  • Points-and-miles hobbyists
  • People maximizing cash-back rewards
  • People who engage in heavy inorganic spend
  • The general public

Known Features of the Apple Card

In yesterday’s announcement, Apple released the features of the Apple Card in some decent detail. In general, the Apple Card is a no-annual-fee cash-back card. There will be a physical version of the card, which is unique in that it will not have any card number, expiration date or CVV code printed on the card itself. The Apple Card will also operate through Apple Pay, which appears to be its primary intended use.

Cash-Back Rewards – The Apple Card will reward users by paying a percentage of each transaction back to the cardholder in the form of Apple Pay Cash. The cash-back structure is as follows:

  • 3% on purchases from Apple – including purchases at the Apple Store and Apple.com, services from Apple, iTunes/Apple Music payments, and App Store purchases
  • 2% on all other purchases using the Apple Card through Apple Pay
  • 1% on all other purchases using the Apple Card physical card

Cash back will be paid on a daily basis, so you won’t have to wait for your rewards.

Redeeming Cash-Back Rewards – With rewards being paid into Apple Pay Cash, they should be easy to redeem. Redemption options include:

  • Making purchases with the Apple Pay Cash you’ve earned, using Apple Pay
  • Using Apple Pay Cash as statement credit to pay your Apple Card balance
  • Sending Apple Pay Cash in a person-2-person payment using Apple Pay
  • Transferring Apple Pay Cash funds to your bank account
    • ACH transfers are free
    • Instant Transfers incur a 1% fee – minimum $0.25, maximum $10

Interest Rate & Payments – The official Apple Card landing page says that variable APRs will range from 13.24% to 24.24% based on creditworthiness. It appears that the Apple Card will work like a normal credit card in that you will make charges during a month-long cycle, then you’ll have until the end of the next month to pay off your balance in full to avoid interest charges. All Apple Card accounts will be set so that payments are due on the last day of each month. Apple also says that it will not charge any penalty rates of interest.

No Fees – A huge and interesting part of Apple’s marketing pitch for the Apple Card is “No Fees.” As we note above, you’ll be charged interest if you carry a balance. But Apple’s “No Fees” pledge is pretty extensive:

Other Account Management Features – The Apple Card has some slick-looking account management features, which include the ability to track your purchases by week or month and the ability to see the exact location of each charge on a map. These features are visually attractive, as with most Apple products. They don’t add any direct monetary value, but they may be useful or at least interesting to some people.

Apple Card – primary account interface
Apple Card – weekly spending graphs
Apple Card – find the location for each charge

Unknowns and Other Factors

There are a few things we don’t know about the Apple Card that could impact our analysis, plus some other factors that are important:

Requirement of an iPhone and iOS – Apple Pay only works on iPhones running iOS, and the Apple Card needs to be integrated with Apple Pay – so, the Apple Card is only available to iPhone users. This shuts a huge group of non-iPhone users out from getting the Apple Card completely.

Sign-Up Bonus – We don’t know whether the Apple Card will have any sign-up bonus or, if so, what it will be. The promotional materials from Apple’s unveiling of the card do not mention any sign-up bonus. Thus, for purposes of this analysis, we’ll assume that there will be no sign-up bonus on this card.

Approval Parameters – We also don’t know anything about what parameters Goldman Sachs will use to determine who is approved for the Apple Card.

How Cash Advance-Type Transactions Will Work – The materials are clear that there will be no cash advance fees on the Apple Card. But what types of cash advance-type transactions will be allowed? And will cash advance-type transactions be treated like normal purchases, in that they will not accrue interest if all balances are paid in full by the end of the following month? Or will cash advance-type transactions begin accruing interest immediately?

Adoption of Apple PayThis article suggests that Apple Pay is supported at 65% of US retail locations, and that this will grow to over 70% by the end of 2019. This is not consistent with our personal experience. In our personal experience, it still seems like far less than half of US merchants accept Apple Pay, although the number seems to be increasing in the past few months.

In our European travels, however, we have found that Apple Pay is widely accepted there – not quite universally, but almost everywhere. The article we referenced earlier also says that Apple Pay acceptance is 99% in Australia.

Practicality of Using Apple Pay – For online transactions, it seems like Apple Pay is not very widely accepted at all. We see a few online stores that take Apple Pay, but not many. In addition, especially in the US there’s a practical problem with using Apple Pay at sit-down restaurants. In Canada and most of Europe, the server can bring a payment terminal to the table where you can add a tip and use Apple Pay easily. But we don’t see this in the US. We’re not sure how one would go about using Apple Pay in most sit-down US restaurants.

Group-by-Group Analysis – Is the Apple Card Good for Anyone?

1. Points-and-Miles Hobbyists

The Apple Card is useless to points-and-miles hobbyists.

The Apple Card’s rewards structure is not best-in-class in any category. In particular, we can earn 3x US Bank points on all mobile payments (including Apple Pay) using the US Bank Altitude Reserve. These are redeemable for travel purchases at 1.5 cents each. Thus, the return on mobile payments using the Altitude Reserve is 4.5%, which dwarfs the Apple Card’s 2% earning. (That said, the Altitude Reserve has a $400 annual fee. But it also comes with a $325 annual travel credit and other benefits to offset the fee, plus it has a 50,000-point sign-up bonus worth $750.)

We can also earn more than a 2% return on our spend in a myriad of other ways, including spending toward sign-up bonuses, spending toward other promotional bonuses, and 2x Membership Rewards (MR) earning (baseline value 3%) on all spend on the Amex Blue Business Plus card.

2. People Maximizing Cash-Back Rewards

Similarly, the Apple Card is useless for people maximizing cash-back rewards.

Some people want to maximize rewards, but they crave simplicity. They may understand that travel rewards are potentially more lucrative but prefer cash-back because travel rewards are more restrictive and require more effort. For these people, we often recommend a two-card cash-back strategy of the Citi Double Cash card, which earns 2% everywhere (but has foreign transaction fees), plus the Barclays Uber Visa card, which has valuable 4% dining and 3% airfare/hotel bonus categories and no foreign transactions fees. (See Can You Beat This? A Simple Cash-Back Credit Card Strategy and Reader Question: Credit Card Advice for a Recent College Graduate)

For people using this two-card strategy, their spend matrix will look like this:

As you can see, this simple two-card strategy would beat the Apple Card for a wide array of spend, including dining, airfare, hotels, and all US purchases where Apple Pay isn’t available. The only categories where the Apple Card would be better would be international transactions using Apple Pay and spend on Apple products & services. These categories are very narrow – and if they’re important to you, you could easily get another card that would fill the gap and exceed the Apple Card’s earning rate.

This morning, Doctor of Credit published an article identifying the US Bank Altitude Reserve and 3 cash-back cards – the Fidelity 2% Cash Back Visa, the Citi Double Cash card, and the Alliant Cashback card – as superior alternatives to the Apple Card. Among other things, Doc notes:

  • The Fidelity 2% card has a sign-up bonus of $100 and also has frequent targeted spending bonuses.
  • The Citi Double Cash card offers price protection (up to $200 per item, $1,000 annual maximum)
  • The Alliant Cashback card has no foreign transaction fees and offers 3% cash back with no annual fee first-year; 2.5% cash back with $59 annual fee thereafter (must spend more than $11,800 in a year to make up the annual fee vs a 2% cash back card)

3. People who engage in heavy inorganic spend

Does the Apple Card have any use for people who engage in heavy inorganic spend? There are enough uncertainties that we think the answer is inconclusive for now.

The fact that the Apple Card will have no cash advance fees at least raises the prospect that there could be some transactions that are liquid enough with no fees or low enough fees that an inorganic spend profit is possible. In addition, the fact that cash-back rewards on the Apple Card are uncapped raises the possibility that profitable avenues could be scalable.

Those who engage in heavy inorganic spend are certainly clever enough and resourceful enough to figure out where the opportunities lie, if there are any. By the same token, we suspect that Goldman Sachs is sharp enough to close any loopholes fairly quickly.

For now, let’s just say that we’re curious about how this story line will play out once the Apple Card is released.

4. The General Public

There are plenty of people who have little tolerance for the effort it takes to maximize rewards, prefer to carry a single card for all spend, and don’t want to pay any annual fees whatsoever. For these people, it seems like the Citi Double Cash card and the Fidelity 2% card would still present a better overall alternative, given that they’d earn 2% everywhere and not just on purchases that could be made through Apple Pay. And as we’ve discussed, pairing one of those cards with a Barclays Uber Visa card for a simple two-card strategy would be even better. For anyone who travels, using travel rewards cards would be much better. And for anyone who doesn’t mind having multiple cards, earning sign-up bonuses is much, much better.

So, it’s very hard for us to recommend the Apple Card for anyone at this time.

That said, if Apple Pay becomes very widely accepted in the US and if the practical problems with using Apple Pay online and in sit-down restaurants are solved, so that you can earn 2% on the vast majority of purchases, at that point we’d say it’s ok for a person who craves simplicity over rewards. The tools that the Apple Card provides in conjunction with Apple Pay are definitely cool. And the combination of getting rewards back almost immediately and being able to redeem them easily is very appealing.

Thus, bottom line, we think it’s possible that the Apple Card could be a reasonable choice for people in the future if Apple Pay nears universal acceptance. We’re sure that Apple is working furiously on making this happen. But for now, the Apple Card falls short.

What do you think about the Apple Card? Will you be getting one when it’s released? How do you plan to use it? Please let us know in the Comments!

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