I got the Apple Card when it launched, make two small grocery store purchases and then was unable to pay the card from my linked checking account, the same one that is used to pay off a bunch of other cards and most of my other bills (housing, medical, insurance, utilities, etc.). I spent 45 minutes on a telephone call with GS customer support which culminated with me verbally reciting my credit card account number to the agent so they could manually enact the payment.
I never used Apple Card after that.
A couple of weeks ago one of the credit reporting agencies notified me that GS Bank had closed an account. I have not yet received any sort of written communication from Goldman Sachs about the matter. There is also something like $0.15 in Apple Cash credit in my name. US consumer finance laws are strict in 2023; that is my property and Goldman Sachs is obligated to return that back to me. There are administrative costs associated with closing an account (even an idle one in good standing) beyond just mailing me a check for fifteen cents (which is less than postage).
Even though my account sat idle for 4+ years, there are still administrative costs associated with servicing the account. Inactive accounts are likely reviewed periodically and servers don't run themselves anyhow.
In the end, my guess is that I cost Goldman Sachs over $500 ($350 acquisition fee, ongoing customer service costs, and account closure costs). And they probably made five cents in merchat transaction fees. Not a very profitable business plan.
As for Apple taking on more of the daily Apple Card responsibilities, that's patently ludicrous. US consumer finance is heavily regulated, much more so than the consumer electronics business. Apple has zero interest in having their business fall under consumer finance regulatory control. Even the idea of Apple spinning off a finance division isn't worthwhile. If they wanted to, they could have done so twenty years ago. And the consumer finance industry will become more regulated as time goes on and newer regulations will apply to existing businesses.
Goldman Sachs thought that they could make oodles of money getting into consumer banking (and not just Apple Card).
They were wrong. Dead wrong.
There's a chance that Goldman Sachs will gradually liquidate their consumer finance operations as their partnerships expire. At some point they might notify all Apple Card cardholders of a hard deadline after which charge transactions will be declined. This assumes that no one is interested in buying Goldman Sachs's consumer operations which appears to be the case.
Actually, after reviewing these links it does not credit the loss rate or the large amounts to Apple Card. It remains rather opaque with that information. Note, that Goldman Sachs also has a branded credit card with GM. Within the GS document on Page 43, they indicate that they did have to absorb $185 million in losses with the GM co-branded car over six months in 2021. I think it is more likely that the abundance of average 660 credit ratings comes from the GM partnership than Apple. It also could be the majority of the loss rate as well.
It does not change the fact that GS just wants out of all consumer facing finance products, but I thought that was an interesting nuance.
The CNBC article also does not directly connect their losses to specific cards, just the the credit cards division of GS.
------------------------------------------------------------------ quoted from Gatorguy:
I did not get the Apple Card until after the savings account was available. But I find myself using the Card more and more. AND when I was traveling, I found that the card did NOT have foreign transaction fees, so it was a very valuable card for me.
I would definitely recommend. Having said that, I hope AMEX is not the next vendor -- they have never been as widely used as Visa and Mastercard.
Apple Card accounts have a higher write-off rate, meaning the account holder hits the trigger point of at least 6 months behind on payments, than the industry average which is 2.93%. That rate of card write-offs is worse than even sub-prime lenders experience.
Now couple that with the fact a whole lotta' Apple users have credit scores under 660...
So why were they approving the cards??? They didn't have to accept them.
Oh, and chalk me up as another happy card user.
Early on it was said that Apple and Goldman Sachs were working closely on the program development, even that it was mostly Apple's design. We don't know if that extended to what Apple users credit score requirement would be. If Apple was pressuring GS to approve as many accounts as they could then Apple would be at least partially at fault. GS of course shoulders most of it since Apple wasn't covering 'em if they guessed wrong and the defaults exceeded expectations. It's also possible that Apple's involvement was puffed up a tad, and this was all Goldman Sachs doing.
But it is for this reason I don't think Apple wants to take on the danger of offering a credit card themselves. Let a partner shoulder the risk and Apple's contribution will be the prestige of Apple's name attached to it, and a list of Apple account contacts to make offers to.
Seems like GS did not do good risk management on this.
The last part of the story on the cancellation of a trading platform also seems like a huge mistake on the partnership. I also think apple is willing to lose money initially to make lots of money later. GS is not the right partner for this. I think Amex might be a better partner but they should segment the cards business based on credit worthiness. Like so many other cards families they should have limited benefits for higher risk individuals to offset the higher default rates. Or simply use another credit model. Also, they can afford to have a slightly lower interest savings account return (3.5% vs 4%) on the fact that the cash back is automatically deposited). Then they can make back more money on purchasing short term treasuries. Lastly, they should have also tried to get into the apple care business or sole other insurance products.
GS is missing out due to short term thinking. But also shows how shrewd Apple is at safeguarding its own interests.
Maybe I'd use it more or even carry a balance - then they'd make some money - but at 27% interest with excellent credit, no thanks.
Amen, it's the highest interest rate of all my cards, so I don't dare carry a balance. And my credit rating is also nearly 800 so I don't know why my interest rate is so high.
The Apple Card is my favorite credit card — most of it really comes down to the app experience, and the ease in communicating with customer service. AmEx is a close second.
I don’t understand the complaints. I use the Apple Card (via Apple Pay) regularly and have had no problems.
The 1% to 3% rebate is great and better than the measly points that other credit cards give. And the 4+% interest on the savings account is also pretty good.
My only complaint is that Home Depot doesn’t accept it (or any tap card) and I once had an issue because the bank once rejected a large purchase and it caused some problems for a few weeks.
Of course the interest rate is too high - IMO, one would have to be nuts not to pay off any credit card before interest is due. They’re all criminal in that regard.
Since payment collection is automatic, I don’t know why GS is losing money, although I would guess it’s because the users are smart enough not to pay interest and because there was no fee. Most banks make most of their credit card profit on those annual fees.
Have had zero problems with the card. Only card I use and I pay it off monthly. Allow all my cash to roll over into savings and have a little bit squirrel away.
All the billing is done electronically so how is hard to send it at the same time. Computers should be doing everything.
They didn't say that sending billing at the same time is hard - they said having the customer support calls come in all at once is the problem.
The only issue I've ever had with the card is that during the pandemic, the payment freeze wasn't longer. But then again, I'm surprised a payment freeze even happened. I pay this off monthly. I use it for nearly everything. The financing for apple products is pretty sweet even as I've moved onto Best Buy's upgrade+ service. It'd be neat if they integrated NFC into the titanium card itself. Or offered some kind of travel benefits, something to help compete with other cards. I wish they'd also calculate interest on a revolving balance differently. If you pay a day late (they base the due time on Eastern Time and not local time to the user) it screws you with interest for 2 billing cycles.
It’d be nice if the article actually gave some data on the source(s) of the losses and compared them to industry averages.
I got an apple card a little over a year ago when I purchased my MBP. I haven’t had any problems with it. I use it only for Apple/Applepay purchases because of the higher cash back amount. In spite of that It’s my least favorite card - the inability to download transactions until after the statement date is a PITA and makes it difficult to track spending. Yes you can look at the wallet app but that doesn’t tell you about any other accounts.
Even now, integration with finance apps like Quicken is pretty kludgey and very un-apple like.
I’ve already had my Apple Card hack.Along with my Apple ID & they did a shopping spree at the Apple Store to a Tune of $1,700 👿👿🤷🏼♂️ of course all was cover by G.S but still very unnerving
We LOVE our Apple Card. It’s our most used card without a doubt. I pay for everything with it instead of using my debit card and then pay it off at the end of the month. Those interest rates are astronomical, after all! Our credit score is over 800 for my husband and I both, so I don’t know why we got such a high rate anyway. Aside from the cash back and savings perks, we love the ease of use of the card and how secure it is. It is so nice to get notifications when a purchase is made and having it in the wallet makes it so incredibly easy for me to look at all my info without having to login to an app or website (bc I can’t ever remember any passwords!). I also love the fact that there is not a card number on the card and that when it’s ran the number is always different for the transaction to make it more secure. That feature is really nice when making purchases as restaurants or other vendors where you give your card to someone, so you know they’re not stealing your card number and security code since they aren’t on the card. It’s also easy to look up my card number when making online purchases. The ease of use is what keeps me using it! It’s also super heavy duty and is attention grabbing! I cannot recommend the Apple Card enough!
How do you make money doing this? The answer is simple — volume.
Not if you're losing money on the average cardholder.
What it looks like is that Goldman Sachs has realized that the new acquisition costs are too much to be recovered in a reasonable amount of time. Poor decisions (like mass billing once a month) has created customer service staffing costs that they can't reduce. My guess is there are 8-10 factors that senior GS management has flagged as major issues. They can't just slap a band-aid on a skinned knee. The patient is bleeding heavily from multiple wounds. For sure it is not just one issue that has elevated GS Apple Card costs.
It's important to note that GS is failing on multiple consumer finance fronts. They're trying to ditch all of their consumer businesses (like one related to home improvement loans) not just Apple Card.
Apple Card is one of Goldman Sachs' problems, not their only problem.
Comments
I got the Apple Card when it launched, make two small grocery store purchases and then was unable to pay the card from my linked checking account, the same one that is used to pay off a bunch of other cards and most of my other bills (housing, medical, insurance, utilities, etc.). I spent 45 minutes on a telephone call with GS customer support which culminated with me verbally reciting my credit card account number to the agent so they could manually enact the payment.
I never used Apple Card after that.
A couple of weeks ago one of the credit reporting agencies notified me that GS Bank had closed an account. I have not yet received any sort of written communication from Goldman Sachs about the matter. There is also something like $0.15 in Apple Cash credit in my name. US consumer finance laws are strict in 2023; that is my property and Goldman Sachs is obligated to return that back to me. There are administrative costs associated with closing an account (even an idle one in good standing) beyond just mailing me a check for fifteen cents (which is less than postage).
Even though my account sat idle for 4+ years, there are still administrative costs associated with servicing the account. Inactive accounts are likely reviewed periodically and servers don't run themselves anyhow.
In the end, my guess is that I cost Goldman Sachs over $500 ($350 acquisition fee, ongoing customer service costs, and account closure costs). And they probably made five cents in merchat transaction fees. Not a very profitable business plan.
As for Apple taking on more of the daily Apple Card responsibilities, that's patently ludicrous. US consumer finance is heavily regulated, much more so than the consumer electronics business. Apple has zero interest in having their business fall under consumer finance regulatory control. Even the idea of Apple spinning off a finance division isn't worthwhile. If they wanted to, they could have done so twenty years ago. And the consumer finance industry will become more regulated as time goes on and newer regulations will apply to existing businesses.
Goldman Sachs thought that they could make oodles of money getting into consumer banking (and not just Apple Card).
They were wrong. Dead wrong.
There's a chance that Goldman Sachs will gradually liquidate their consumer finance operations as their partnerships expire. At some point they might notify all Apple Card cardholders of a hard deadline after which charge transactions will be declined. This assumes that no one is interested in buying Goldman Sachs's consumer operations which appears to be the case.
the GM co-branded car over six months in 2021. I think it is more likely that the abundance of average 660 credit ratings comes from the GM partnership than Apple. It also could be the majority of the loss rate as well.
It does not change the fact that GS just wants out of all consumer facing finance products, but I thought that was an interesting nuance.
The CNBC article also does not directly connect their losses to specific cards, just the the credit cards division of GS.
------------------------------------------------------------------
quoted from Gatorguy:
https://www.cnbc.com/2022/09/12/goldmans-gs-apple-card-business-has-a-surprising-subprime-problem.html
and beginning page 43 of this doc:
https://www.goldmansachs.com/investor-relations/financials/10q/2022/second-quarter-2022-10-q.pdf
I would definitely recommend. Having said that, I hope AMEX is not the next vendor -- they have never been as widely used as Visa and Mastercard.
The last part of the story on the cancellation of a trading platform also seems like a huge mistake on the partnership. I also think apple is willing to lose money initially to make lots of money later. GS is not the right partner for this. I think Amex might be a better partner but they should segment the cards business based on credit worthiness. Like so many other cards families they should have limited benefits for higher risk individuals to offset the higher default rates. Or simply use another credit model. Also, they can afford to have a slightly lower interest savings account return (3.5% vs 4%) on the fact that the cash back is automatically deposited). Then they can make back more money on purchasing short term treasuries. Lastly, they should have also tried to get into the apple care business or sole other insurance products.
GS is missing out due to short term thinking. But also shows how shrewd Apple is at safeguarding its own interests.
I got an apple card a little over a year ago when I purchased my MBP. I haven’t had any problems with it. I use it only for Apple/Applepay purchases because of the higher cash back amount. In spite of that It’s my least favorite card - the inability to download transactions until after the statement date is a PITA and makes it difficult to track spending. Yes you can look at the wallet app but that doesn’t tell you about any other accounts.
Even now, integration with finance apps like Quicken is pretty kludgey and very un-apple like.
What it looks like is that Goldman Sachs has realized that the new acquisition costs are too much to be recovered in a reasonable amount of time. Poor decisions (like mass billing once a month) has created customer service staffing costs that they can't reduce. My guess is there are 8-10 factors that senior GS management has flagged as major issues. They can't just slap a band-aid on a skinned knee. The patient is bleeding heavily from multiple wounds. For sure it is not just one issue that has elevated GS Apple Card costs.
It's important to note that GS is failing on multiple consumer finance fronts. They're trying to ditch all of their consumer businesses (like one related to home improvement loans) not just Apple Card.
Apple Card is one of Goldman Sachs' problems, not their only problem.