OK, I really don't get this. How does GS lose money on a credit card? Are they paying Apple a disproportionate amount of their rake from the cardholders? The article says "credit losses" so somehow more Apple Card holders are welching?
Or...it is possible GS thinks they just aren't making the billion they planned? Not sure that's a "loss."
Nope. They're losing plenty. Their customer acquisition cost is $350 per account. In addition, the Apple Card attracts a much more affluent demographic who pay their balances every month, depriving GS of interest charges. On top of that, there is the "buy now, pay later" program that allows customers to pay over 4 months without interest charges. That's how they're losing money. I wouldn't cry for GS, though. They made $10.9 billion in the second QUARTER of this year, even with the Apple Card losses.
OK, so I understand: GS pays Apple $350 for each new account, and since those new accounts generally don't pay GS interest (affluent customers) GS can't make back the $350? And who gets the swipe fee from merchants (that I am always asked to reimburse the merchant for)? Is there no swipe fee charged to a merchant on the Apple Card? GS doesn't get a cut of each transaction?
I am sure GS has overhead on these operations. They have to pay staff to provide customer service; and other infrastructure like IT and the like. But a billion in losses to that? Really?
eightzero, you "understand" nothing. mayflydid not say "GS pays Apple $350 for each new account." Go back and start over. BTW, this card from GS is the most miserable credit card experience I've ever had, for many reasons, which I've written about before. I've simply made it dormant, seldom—if ever—to be used again.
It is clear I understand nothing, hence the question mark at the end of the sentence. Go back and read again. I am very confused about what is being reported and how it happened. I'm not clear on that $350. Is it some sort of overhead estimate? Licensing to Apple? In any case, it seems like someone majorly blew this. A GS shareholder should be outraged...and this is clearly not of Apple's doing.
So a $350 per customer acquision cost could described this way: GS spends $3.5 million dollars advertising the Apple Card. One out of every 10,000 people get the card, making the per customer acquision $350.
It's not just advertising.
GS has their own processes in approving applicants. Credit reports aren't free. And credit reports don't reflect other financial aspects of an applicant's life. Time at current employer, salary, time at current residence, court records, whatever. GS isn't just pulling a VantageScore from a database and rubber stamping the application.
Even the physical card mailout costs money. A new customer acquisition is more than some ads on social media.
Iirc, my Apple Card application was approved in a few moments — and I had reporting freezes on at all four credit reporting agencies. Likewise, a year later, when I requested a higher credit limit, it was approved within seconds. I’ve never been wealthy, but I did have a steady job at the time, and have always been the classic credit card holder deadbeat: I never buy on credit what I can’t afford to pay by the end of the month. It took me years, when I was first working and, soon after, had a young family, but I built up first a six month, then a year, then two years of emergency/replacement income so I wouldn’t have to pay credit card issuers’ usurious interest rates if my home or vehicle needed expensive repairs, or if I got laid off (which would have required an act of Congress, but it’s been known to happen).
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