The new Apple credit card has people talking. Apple is very good at identifying gaps, holes or opportunities in the marketplace, and the Apple Card is just the latest product that promises to improve/augment our lives. But will it live up to the hype?
The Apple Card is supposed to launch in the U.S. this summer, but many predict that it won’t have a Canadian presence for at least a year after its initial launch. The card will have a cashback program that offers 3% on Apple products, 2% for using Apple Pay and 1% for using the Apple Card; that certainly is competitive with some other credit card companies.
Promising no annual fees, no cash-advance fees, no international fees and no hidden fees is an added bonus. Also, the guarantee of having lower interest rates for carrying balances will be attractive to some. Apple is also touting that there will not be any foreign currency charges, which will translate into a savings of an additional 2.5%.
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This all sounds great, but what’s the catch? Well the obvious one is that you need an iPhone to use the service. However, the devil is in the details – which have yet to be fully released. We don’t know what “low” interest rates on carryover balances means. If the card has a 5% interest rate, then that would definitely be more than competitive. But if it’s 15%, then there are more cost-competitive credit cards on the market.
Though this is Apple’s first significant foray into the financial services market, I suspect it could be a launching pad into other financial products like investments, life insurance and mortgages, which will force the brokerage houses, insurance companies and banks to stand up and take notice. This could be a great thing for the consumer.
However, consumers will be giving Apple a lot more data in exchange for these Apple perks and rewards. The amount of data that Apple already has on us as consumers is astonishing, and with the launch of a credit card, it will have access to significantly more user information.
At the end of the day, the Apple Card is still a credit card. That means that unfortunately, it will not get you out of debt. It will not transform you into a responsible shopper. It will not prevent you from spending outside of your means. Having the discipline to use a credit card for only what you can afford is what matters most, and that is a skill that you must develop. Cashback incentives are great, but only if you can afford to pay off your balance every month. Otherwise, the interest you will be paying will offset any upside of receiving cash for your purchases.
Apple is getting into the financial services business because it sees a marketing opportunity and a new way to make money. It has huge shareholder accountability that demand performance and returns. Just remember that some of those returns will be coming at the expense of consumers using the Apple Card.