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After many rumors and a wealth of predictions, Apple has finally unveiled its plan of entering the credit card market: the Apple Card. Partnered with Goldman Sachs Bank USA and Mastercard, Apple is transforming its Apple Pay functionality into a full-fledged credit card service.
Beginning this summer, iPhone users will be able to apply for an Apple Card within minutes and completely through the Wallet app on their phones. The card will offer 2% “Daily Cash” on all purchases, 3% for purchases done through an Apple service and 1% for purchases done using the physical version of the Apple Card.
What are Apple's Goals?
According to Apple, the company has four goals: Simplify the application process, eliminate fees, have consumers pay less interest and strengthen security and privacy.
Apple has taken some radical stances to reach these goals. For example, the Apple Card features no annual, late, international or over-the-limit fees whatsoever. There is not even a penalty fee for missing a payment. (Late or missed payments will result in additional interest accumulating toward the customer's balance.)
In addition, the Apple Card will encourage its users to pay more frequently and in greater amounts to decrease the total interest paid. In line with Apple's goal for greater transparency, the Apple Card features a user interface that shows various payment options and the resultant interest costs. Cardmembers will be able to see, with full transparency, how to lower the amount of interest they pay per cycle.
Apple has also taken quite a few steps to address the concern regarding privacy and security for its Apple Card users. In particular, the Apple Card uses the built-in security of the iPhone. The card number is stored within the user's iPhone, and every purchase must be authorized with either Face ID or Touch ID and a one-time unique dynamic security code. Apple also claims that the company’s security and privacy architecture means that not even Apple will have records of cardholder's transactions. Apple also vowed that Goldman Sachs Bank USA will likewise not have any access to this information.
Daily Cash vs. Cash Back
However, what seems to be the most interesting aspect of the Apple Card is a new function: Daily Cash. Users will immediately receive a percentage of every Apple Card purchase amount back as Daily Cash, which is added to the user's Apple Card balance daily and can be used immediately. This is a similar function to cash back, but there is no waiting period whatsoever. Cash back is typically given at the end of a payment cycle and in one lump sum, but Daily Cash is provided after every purchase, making it far more accessible.
Cardholders will receive 2% Daily Cash on all purchases made with the Apple Card. They will receive 3% if the purchase is made directly with Apple (e.g. Apple stores, App store, or Apple services).
Apple has also unveiled that it will be launching a physical copy of the Apple Card that is made of titanium. This card is meant to be used for transactions where Apple Pay is not yet accepted. The Daily Cash reward of any transaction using the titanum card is only 1%, significantly less than the base 2% of using the digital copy of the card found in the Wallet app.
Final Impressions on the Apple Card
The Apple Card seems to be challenging a system that has been in need of renovation for some time now. The concept of a credit card completely devoid of fees besides an interest rate (a rate that the card is designed to lower as much as possible) goes against the simple principles from which credit card issuers make their money.
Furthermore, the Apple Card is also designed to train cardholders to make smarter financial decisions and eventually develop healthy habits. The card breaks down consumer spending into a range of categories, shows percentage changes between weeks and tracks where your money is going in a very visual and clear way. This allows cardholders to understand where their money is going and where it is being wasted.
The Apple Card is going against the grain of an established industry and its set practices, but that seems to be exactly the change the industry needs. If the Apple Card is able to deliver on its promises and truly operate in the best interest of consumers, we predict it will be a smashing success.