My Apple Card Conundrum

One of the more important products Apple has brought to market thus far in 2019 is the new Apple Card. This is a virtual as well as a real credit card that Apple created in partnership with Goldman Sachs Group. I have had the privilege of test driving the card for a bit and love its various reporting features and the way it allows me to become a more informed consumer by using its various analytical capabilities. Here is a short video about this card and its features if you are not up to speed on this new credit card service from Apple.

One of the major incentives to use the Apple Card is its daily cashback feature. Depending on what you buy, you can get cash back from 1-3% daily. There are other credit cards that offer cash back, but none give that back to the user on a daily basis. Apple Card can be tied to Apple Pay and makes Apple Pay more important to users too as it gives them these analytical features so they can stay much more up to speed on their spending and money management.

I personally try and not use too many credit cards for various reasons. As you may know, the more cards you have, the more it impacts your credit scores. I have two cards for the business, one tied to my bank and used as a debit card and then one that is for personal use and is tied to one of the airlines I fly the most so I can get mileage when making purchases. I fly a lot so earn a lot of miles by flying so I use my airline’s credit card the most for personal items, and that adds significant miles to my mileage balance. Over the years, I have used miles often for vacation flights and even products available through miles.

One of my other cards has significant travel insurance tied to it, which is also a very valuable perk of that card. I also get points from this card that pays off in gift cards often, which leads me to my Apple Card conundrum. Today I use Apple Pay more for convenience than for big purchases or big-ticket items. Those I do on the other two cards for the mileage points, or for travel for the insurance and points I get from it.

Apple’s 1-3% cashback on the Apple card is very tempting for use on larger purchases, but it comes with no miles, travel insurance, or gift points. While I do love its virtual and real credit functions and its analytical tools, I will, over time, need to weigh the true benefit of its cashback feature against the benefits of the other cards I use when it comes to big purchases and especially the miles I earn on my airline card.

I suspect I am not the only one with this conundrum. The airlines especially have been marketing their own credit cards for over a decade to entice flyers to earn miles and keep them loyal to their airline. And various cards from other companies have upped the ante in terms of other buying incentives and perks.

But Apple’s move to give cashback on a daily basis and adding the analytical tools to their card is going to put pressure on the airlines, and other credit card providers create programs similar to what Apple is providing.

I believe that Apple’s analytical tools are an industry game-changer. In a short time, I have used that feature, and it has become apparent that making a consumer more informed about their spending and real costs of a credit card is a really big deal. In fact, I predict this will become of the #1 thing people who use competing credit cards will be asking for their cards.

Apple’s daily cashback feature will also put pressure on those with cards that give cashback to follow suit. How fast they can respond with a competitive program is a big question. I understand that Apple had been working for a couple of years with Goldman Sachs Group to create an instant cashback program and that it was a relatively complex problem to solve. But this is a case that if Apple can do it, you can expect the major companies with cashback credit cards to try and do some kind of similar innovative program to stay competitive over time.

If I could have Apple add any other feature to this card, it would be to find a way to do a deal with the airlines to offer the option of airline miles like one can get from Chase Sapphire Preferred and Capital One Venture. If they added that perk, I would dump my airline card in a heartbeat and make the Apple Card my preferred card for travel and personal use. Not sure how possible that would be, but this would be on the top of my wishlist for future Apple Card features.

Regardless of my conundrum, I have no doubt that the Apple Card will become one of the only other credit cards I will use often. It will especially be valuable when I buy Apple products that get the most cashback in the program. Given Apple’s loyal installed base, I believe it will be a big hit with that crowd. It will also serve as a way to bring more people to the Apple stores, which is an important goal for the existence of this card. But Apple may need to do some aggressive marketing of this card to those especially who use airline mileage cards.

This new Apple Card, according to Bloomberg, sports that “the analysts see a 2023 earnings-per-share gain of just 1% for Apple, and 2% for Goldman, because the card has no fees, low-interest rates, and its profitability will likely trail the industry average. What the market “misses,” they say, is that by “layering in the benefit of shifting just 10% of U.S. hardware sales from third parties to the Apple stores, the profitability of the program increases from below average to average.”

Its dual goal to tie more people to Apple products as well as earn some profit will be interesting to watch as it has the potential to be another important product for Apple’s service business.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

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