What the Apple Card gets right, and wrong 

The first thing to know about the Apple Card is that it is not really a card.
To be sure, the tech giant’s first foray into personal finance includes a bank card, quintessentially white, titanium, minimalist in design and stripped of the 16-digit number found on most cards. But Apple wants users to actually pay for goods using Apple Pay via an iPhone or Apple Watch.

The “hardware”, if a credit card can be deemed as such, is mostly irrelevant. Apple even incentivises consumers not to use it, giving just 1 per cent cash back on purchases made directly with the card — versus 2 per cent when using its Apple Pay mobile payments system and 3 per cent for Apple purchases, including App Store payments.

The product is being rolled out later this month in the US, but some early adopters and journalists had the chance to sign up last week. The process is simple, requiring just an iPhone, a driver’s licence and an OK credit score. Within minutes, users can begin buying stuff wherever contactless payment is accepted. No need for the card to arrive in the mail.

The differentiator is the software, which in this case is the Wallet app. That is where the debts are tallied and where Apple hopes to impress by bringing “transparency” to personal finance, in the manner of Monzo and Revolut before it.

Among the main features is how the credit balance is displayed. If the cardholder owes, say, $7,000, but plans to pay off only $4,000 this month, Wallet will immediately do the maths and show how much the interest payments are if the remainder is paid over a few months or a few years.

With a flick of the thumb, time is extended on a virtual dial, and the colour goes from a welcoming green to an alerted red as the interest charges rise.

Apple says the feature offers unprecedented transparency and, unlike banks that make money when you stick to minimum monthly payments and get burdened with interest charges, Apple “encourages you to pay less interest”.

Purchases also get colour-coded, similar to some personal finance apps, making it easy to tally up the cost of those Starbucks visits.

Another feature is “daily cash”. In place of air miles or rewards points, which can be difficult to understand and fluctuate in value, Apple Card simply calculates the daily cashback payment and deposits it in the user’s account. A little grey box confirms, for each purchase, what cash reward was received.

Finally, there is the privacy angle. Apple claims it cannot see what purchases are made or what the balance is. Its partner, Goldman Sachs, needs to be able to access the information to handle the account, but it has pledged not to use this data for upselling or to share it with third parties for marketing and ads.

Apple drives revenue from engaging consumers and selling hardware, not selling ads, so it can prioritise privacy and trust with consumers, said Carolina Milanesi, an analyst at Creative Strategies. “Apple does not share data with Goldman Sachs nor with the retailers,” she said. “It is a great way to grow loyalty especially for the more valuable customers who are deeply engaged in the ecosystem.”

These features might fall short of Apple’s claim to rethink “everything about the credit card”. Many observers point out that cashback rewards are mediocre. The find-the-best-credit-card folks at NerdWallet, for instance, call them “mundane”.

Apple points out there is a zero annual fee and no penalties for late payment. But there are no sign-up rewards either.

Without the Apple branding and sleek software, the humdrum rewards might spell a flop given that the main reason people switch cards is for “a better rewards programme”, said Jim Miller, an adviser at the marketing research company JD Power.

But he said early signs suggest the card will be a hit. A JD Power survey published last week, before the card was even available, found that 52 per cent of those aged between 18 and 29 were aware of it; of those, more than half were likely to apply.

Plus, the 3 per cent cashback payment through the App Store includes third-party services such as Uber and Lyft, in addition to the growing array of Apple services, from iCloud to movies and games. Once an iPhone user is earning cashback from all those purchases, the latest Samsung phone might look less appealing versus staying with Apple.

And that, of course, is Apple’s play. The more people it can connect to its ecosystem, the more people are likely to pay up for its high-margin phones, then pair them with AirPods, Watches and an Apple News+ subscription.

As the television chat show host Oprah Winfrey put it in March: “They’re in a billion pockets, y’all. A billion pockets.”