After teasing it earlier this year, Apple officially entered the credit card market in August by partnering with Goldman Sachs to release the new Apple Credit Card.
What makes this card unique is that it is primarily a digital card, designed to live in your iPhone’s Wallet rather than the one in your pocket or purse. The card has no card number, and instead initiates a different encrypted transaction code with each purchase. This is the first card on the market that’s number cannot be stolen from you.
The application process for this card is unique and innovative in many ways: First, you apply through your phone’s Wallet App rather than on the bank’s website. The application itself is one of the most visually pleasing applications out there, and only requires the last four of your Social Security Number while others require the full number. To further ensure the person applying for the card is who they say they are, the application also requires you to snap a photo of your driver’s license prior to submitting.
The Titanium Card
Apple’s game-plan here is that you will use this card wherever Apple Pay is accepted. But realizing that A) Apple Pay isn’t accepted everywhere; and B) People like me like having a sexy physical card in their arsenal, Apple offers a physical card made of Titanium that can be used at a basic terminal.
Revolutionizing Cash Back
Every credit card on the market currently requires some wait time between actually spending money on the card, and redeeming the associated awards that come from it. The Apple Credit Card is the first to instantly give you your cash back earned on every purchase as you spend it. No more waiting for a statement to close and earning your rewards in monthly intervals. Instead, the rewards instantly appear in your Apple Wallet in the form of Apple Cash. These funds can be used to pay your Apple Card, sent to friends or deposited into your checking account.
Your New Main Squeeze?
So is this card your new go-to for everything you buy? Definitely not. The earn rate is low, offering just 2% back when you use the digital form of the card to pay with Apple Pay; you only receive 1% back when using the physical titanium card. If you’re shopping Uber or Apple with your digital card, you’ll earn 3% back. There are cards in the market, and in my wallet, that earn at least that much, if not more, on each of those categories. So while this card may not be my new primary, I look forward to being a consumer of the innovative approach when making “everyday purchases” with Apple Pay and grabbing the 2% back in a new way.
The Danger of Convenience
My biggest concern with the Apple Credit Card is its convenience. Consumers already may spend more when using a credit card than they do when using cash; the average American has over $16,000 in credit card debt! Apple’s new card carries a hefty 17.99% APR which is one of the highest on the market, and can be easily applied for by any iPhone user. Without the clear connection to a bank, young adults could easily obtain the card, run up a balance “trying out the new technology,” and find themselves in a terrible debt years later as they mature. That said, for the responsible user, this card will make a great first card for young people, and with no annual fee, my guess is that it will become the “oldest account” driving their credit score ten years from now as it continues to live in their Apple Wallet.
The Future of Apple Card
In order to be a contender in the market, Apple will need to offer more than convenience. While I worry that the future of Apple Wallet and Apple Pay may require exclusive use of their own card, the better way to grow in this market will be for Apple to make its card competitive on its own; offering a higher earn rate in a category than anyone else. We may also see a premium version of the card down the road that offers a competitive earn rate in exchange for an annual fee. But for now, we’re on the brink of something new, and I’m excited to be a part of it.