Apple is once again preparing to bring a shiny new product to market, and there’s plenty of buzz about it, as is typically the case with each new offering from the trendsetting tech company.
In this case, however, the new product is a credit card that Apple calls groundbreaking.
The Apple website claims as much, stating: “Apple Card completely rethinks everything about the credit card. It represents all the things Apple stands for. Like simplicity, transparency, and privacy. It builds on the incredible ease and security that millions of people love about Apple Pay. And it’s the first card that actually encourages you to pay less interest.”
Those are very bold assertions in an already crowded credit card landscape. And as it turns out, some of those claims just may be overstated.
Being launched in partnership with Goldman Sachs, the Apple Card includes a variety of noteworthy features such as immediate, daily cash back and no annual fee, cash-advance fee, over-the-limit fee, or late fees. Apple Card users will also have the ability track and sort spending into helpful color-coded categories on their devices.
Perhaps the most buzzed about features, however, are the card’s security offerings, which Apple heralds as a new level of privacy. Among the big takeaways here is that the card itself will not have a physical number anywhere on it, or a CVV code for that matter.
But are all of these features truly new and groundbreaking? For many experts, the answer to that question is a resounding no.
“For the most part, what Apple is offering is not all that unique. Most of these features are out there already,” said Ted Rossman, an industry analyst for CreditCards.com. “They’re doing some innovative things with security, but the rewards, fees, and interest rates, these things are already out there and in many cases the offers elsewhere are better.”
Here’s a closer look the Apple Card’s major claims and how they stack up against the competition.
Security Features
Let’s tackle the Apple Card’s various security features first, because they’re generating much hype. As noted, the Apple Card will not have a physical number on it, nor will it have a CVV code or expiration date. All of which is very cool.
And it is indeed new to the industry, said Rossman, who explained that the lack of a physical number on the card is a step forward in security from credit cards with EMV chips, which have become ubiquitous.
“This is going to improve online security. If a crook steals your Apple Card, just having the card won’t be enough to make a purchase,” he explained. “Chip cards haven’t helped us at all with online fraud. And with Apple taking the card number off the card, and the CVV and the expiration date, it means someone who finds or steals the card won’t be able to buy anything online.”
To this, the Apple Card adds yet another layer of security as well, the dynamic CVV code, explained Rossman. In other words, the card’s CVV, automatically generated in the credit card app on your iPhone, will be ever changing.
As groundbreaking as that is, it’s less a giant leap than a logical step forward from virtual credit card numbers, which have been around for quite some time, and which the Apple Card will offer as well. Using a one-time virtual credit card number can be helpful on those occasions when you don’t necessarily trust an online merchant, or if you’re signing up for a free trial or subscription and don’t want your card charged the next month if you forget to cancel.
“This has been in use for a while,” continued Rossman. “A consumer can sign up for a virtual card number with a bunch of issuers, including Capital One and Bank of America. You just go to their website or call them and say I want a virtual card number. And it could be for just a one-time use or you can use it for a year if you want.”
In the case of the Apple Card, these virtual numbers can be generated on demand, without having to log in to your card issuer’s website.
The idea behind such numbers is that if the information is accessed by a criminal, the individual wouldn’t have your actual credit card number, thus limiting any harm that can be done.
Interest Rates
The interest rates Apple is advertising for its forthcoming card range from 13.24% to 24.24%, based on the applicant’s creditworthiness. Apple describes them as being among the lowest in the industry.
Rossman says they’re not all that different than what’s already being offered by other cards.
“The 13.24% is a little lower than what we see at CreditCards.com as the average low end of the range. Typically, it’s just a shade under 18% and typically the high end is 25%,” he said.
The fact that Apple is advertising rates from 13.24% to 24.24% also suggests the card will be marketed to a broad audience and that consumers with a subprime credit score will likely be approved, added Rossman.
“None of that is all that different,” Rossman added.
Cash-Back Tiers
The Apple Card provides 3% back on everything purchased from Apple, whether that transaction occurs in a store or online. It also features 2% cash back every time you buy something using Apple Pay, no matter what the purchase is, and there will be no limits. Finally, the card includes a 1% cash back offer for purchases at stores or on websites that don’t yet accept Apple Pay.
If these numbers don’t exactly sound earth shattering, it’s because they’re not.
“The US Bank Altitude Reserve Visa Infinite Card offers 3% cash back on mobile wallet purchases and if you redeem for travel there’s a 50% bonus,” explained Rossman. “Apple only offers 2% back on Apple Pay purchases, so the Altitude Reserve Visa is beating Apple at their own mobile wallet game.”
The Citi Double Cash Card is another example of a no-annual-fee card already offering 2% cash back on purchases, said Rossman. And these are just the first few examples that come to mind.
Instant Cash Back
The Apple Card’s instant cash-back offer, on the other hand, may legitimately be unique, experts say.
When users buy something with their Apple Card, a percentage of the purchase will go back into Apple Cash Card in the Wallet app. This happens immediately, not at the end of the billing cycle 30 days later. The money goes right onto the Apple card, so it can be used just like cash or it can be applied to your Apple Card bill or sent straight to your bank account.
“This is truly groundbreaking,” said Cyndie Martini, president and CEO of Member Access Processing, an aggregator of card services for credit unions.
“I expect to see other cards offer this in the near future, but only if it means cardholders start to use their card more often to get Daily Cash,” Martini added. “This is the one Apple benefit that could potentially shift the market. Rewards are ubiquitous in the industry. However, current industry standard is that rewards are given to users on a monthly basis, or nearly so. Apple has narrowed that window to an almost immediate delivery of rewards.”
Though the instant cash back feature itself is noteworthy, it’s not likely to add up to very much, says Jim Miller, vice president of banking and credit card practice at J.D. Power.
“Most cardholders don’t spend enough that getting access to their reward dollars every day makes a difference,” Miller explained. “If an Apple Card customer spends $1,000, that’s about $33 dollars a day. If all of their spending is through Apple Pay, they’ll earn 2% in daily cash, which will be 67 cents per day, or $20 for the entire month. Most customers won’t care if they have to wait a month to get $20 compared to getting 67 cents every day.”
No Fees
No fees, not even hidden ones, is definitely a tantalizing offer. And in Apple’s case, that includes no annual fee, no cash-advance fees, and no over-the-limit fees or late fees.
Among the existing cards that make similar offers is the Promise Visa from PenFed Credit Union.
“They talk about no fees the same way the Apple Card does,” said Rossman. “That card, however, has a penalty rate where if someone pays 60 or more days late, the credit card’s interest rate will increase to 29.99%. But there are no other fees, so they’re talking the same kind of language as Apple.”
The Petal Card is yet another example of a credit product that has no fees, said Rossman.
“They’re an interesting company, they do cash flow underwriting,” said Rossman of the Petal Card. “They take a detailed look at your finances. A lot of the people they’re marketing to don’t have a credit score. They have a lot in common with the Apple Card. The interest rates are similar and the language is eerily similar to what the Apple Card is saying, with no annual fees and no late fees.”
Encouraging Users to Pay Less Interest
In big, bold letters, Apple proclaims on its website that its upcoming card will be “The first credit card that actually encourages you to pay less interest.”
That, however, is not exactly true, according to experts.
The website explains the offering this way: “The best way to save on interest is to pay your balance in full every month. When you can’t do that, Apple Card does the math for you. Choose any amount you wish to pay — $530, $780, $1025 — and watch Apple Card estimate the interest cost for you. In real time. So you can make an informed decision.”
Here’s the thing, though: Do you ever look at your credit card statement? Have you noticed many of them have a table explaining how much interest you’ll be facing if you choose to only make the minimum payment? And the same table often explains how much less interest you’ll accrue if you opt to make a higher payment.
Maybe all credit cards don’t spell it out exactly as Apple is proposing, says Uri Abramson, co-founder of OverdraftApps. “But suggesting that paying a bit more will help you pay less interest is like pointing out that milk is white,” he says. “Credit card statements offer direct information about how to avoid paying interest and contain a minimum payment warning. So, this is a bogus claim.”
The Big Takeaway
Apple has always been good at generating buzz around its game-changing products. The company is legendary for creating shiny new must-haves that become status symbols among the cool kids.
In a number of cases, Apple products have lived up to all of the hype. But not always.
“With their new card, they’re doing what Apple has always done. They’ve taken the best parts of what a lot of people do already and consolidated it into one shiny package,” says Chris Ligan, vice president of acquisitions for Auric, a credit card processing company.
Miller, of J.D. Power, offers a similar overall assessment of Apple’s latest product.
“Apple’s strength is taking something that already exists and improving the design and making it easier to use. They’ve done this with the Mac, the iPod, and the iPhone. All were existing products which Apple made much better,” said Miller. “While the Apple Card has very few unique features, they’re putting together a lot of the best credit card features into a single package.”
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