I watched the Apple special event today on my iPad. Much of the fanfare will fall on Apple Arcade, Apple TV+ and Apple News+. And then there was the surprise guest, Oprah Winfrey. For me, the big news was the new Apple credit card.
Apple partnered with Goldman Sachs and MasterCard to introduce the Apple Card. Available this summer, it will be a game changer.
The cash back rewards of the Apple Card are best in class. Consumers will earn 3% cash back on purchases at Apple, 2% cash back on all other purchases using Apple Pay, and 1% cash back on purchases with the physical, titanium credit card. These rewards alone qualify the card as one of the best cash back credit cards available today. It competes head-to-head with the likes of the Citi Double Cash and Fidelity Visa cards.
Three features of this rewards system stand out. The first is that the 2% cash back requires the use of Apple Pay. While Apple Pay has penetrated the U.S. retailing market, there are plenty of stores that still don’t accept it. I know because it’s annoying to waive my iPhone over the credit card device only to realize that I’m at a retailer that has yet to join the 21st century. If the demand for Apple Card is high, it could encourage more retailers to accept Apple Pay. And the 2% rewards will encourage more consumers to use it.
Second, the Apple Card pays out the cash back rewards daily. No longer do you need to wait to accrue a minimum amount of rewards or redeem them online. Cash back is added to your account daily. Called Daily Cash, it will be added to customers’ Apple Cash card each day. It can be used for purchases using Apple Pay, to pay down the Apple Card balance, or even to send to friends via iMessage.
Finally, the 3% rewards apply not only to purchases at Apple stores, but also on the App Store and for Apple services. This should in turn drive more consumers to the Apple ecosystem.
In short, there are none. At least there are no fees that really matter. There is no annual fee, late fee, international fee, or over-the-limit fee. There’s not even a penalty rate.
As one would expect from Apple, the Apple Card app’s simplicity is stunning. It clearly shows the card’s balance, how many days until a payment is due, and daily and weekly spending activity by category. In this way, the app could function as a stand alone budgeting tool. With just a tap you can see your spending by color-coded category as well as your weekly and monthly total spending.
What caught my eye, however, is how it conveys payment and interest rate information to the consumer. The app will enable consumers to easily change their monthly payment amount to see how it will affect interest charges. As you slide the total payment higher, the app indicates how long it will take to pay off the balance given that payment amount. Consumers can then pay their monthly bill right from the app.
And speaking of payments, the Apple Card has finally done what I know many consumers want. Apple has made it easy to make multiple monthly payments in order to reduce interest charges.
The app will make it easier to understand the source of a purchase. Have you ever seen a credit card line item from a store you didn’t recognize? As I record my spending in YNAB every week, I encounter this on a regular basis. With the iPhone location service, you can identify where a purchase occurred and the name of the store.
Finally, support is just a text message away.
It will be interesting to see how other credit card issuers respond. One thing is for sure. The combination of an excellent cash back card with the simplicity and functionality of the Apple Card app has the potential to change the industry in a way that’s better for consumers.