Here’s why I’m not impressed with the Apple Card cash-back reward

as of Aug. 2 ranged from 12.99% to 23.99%, according to the company.

Consumers love cash back offers, boasting that they get free money for purchases they had planned to make anyway. I’ll concede that you may be actually getting a reward your charges are for necessities. WASHINGTON — Please, But are they? don’t fall for the hype Cash back is the most around credit cards that popular type of rewards give you cash back. The psycredit card, with 49% of chology behind this perk U.S. adults carrying at least is all about getting you to one such card, according to spend more money. a recent CreditCards.com

There’s been so much report. buzz lately about the newly But let me burst your introduced Apple Card. In cash-back bubble. particular, Apple touts the If you spend $1,299 on a card’s “compelling cash13-inch MacBook Pro at the back rewards program.” Apple store using the new

OK, let’s look at Apple’s Apple Card, you get $38.97 cash-back feature. back. If you need the com

■ Customers will receive puter, that’s a decent bonus. 2% back every time they use But wait. You aren’t Apple Card with its mobile ahead financially if your wallet Apple Pay. purchase is more of a

■ Card carriers get 3% want than a need. If you’re cash back if they use the upgrading your perfectly card for purchases made performing iPhone 8 to the directly with Apple — includ- new iPhone XS Max model, ing at Apple Stores, apple. which has a retail price of com, the App Store, the $1,099, yes, you’ll get $32.97 iTunes Store and for Apple back. However, you’ve services. spent $1,099 on something

■ Apple recently that wasn’t a necessity. announced that card users Apple wins. would also receive 3% You lose. cash back when they use You could have used the the Apple credit card with money to boost your emerApple Pay for Uber and gency fund or reduce what Uber Eats. you owe on your student

■ For purchases made loans. with the physical titanium What if you invested the card, customers will get 1% money instead? back. For instance, you could

Getting cash back seems take the $1,099 and invest it like a win/win situation for in a low-cost growth index credit issuers and consumfund. Instead of charging ers. things on your Apple Card,

Lenders get money from you could invest the value merchants when consumof those purchases — let’s ers use their cards (although say $5,000 each year — into many businesses are passan index fund. If the fund ing along the processing fee ended up with an annual either directly or in higher rate return of 6% after prices). And if a cardholder 10 years you could have doesn’t pay off the bill in $68,213.43, assuming all of full, the card issuer collects your annual investments interest. The variable interhappen at the beginning of est rates on the Apple Card the year, according to the investment returns calculator at Bankrate.com.

Minus your invested capital, you’ve earned $17,114.43 (after a tax rate of 15%). Contrast this with cash back of $1,038.97 over 10 years from the computer you bought along with other purchases you made with the card through Apple Pay, earning 2% back.

Of course, investing means putting your money at risk. But based on past stock market performance, you’ll get more return for your money from the stock market. Let’s say you invest in an index fund that seeks to track the investment performance of the Standard & Poor’s 500 index, an unmanaged benchmark representing the 500 largest U.S. publicly traded companies. In the last 10 years, the S&P 500 has had a total return of 11.20%, according to investment research firm Morningstar.

And need I remind you that the cash back feature is a fool’s errand if you don’t pay your credit card off every month? According to the Federal Reserve in 2016, half of families with credit card debt had at least $2,300 of credit card debt carrying over monthto-month, while on average families with credit card debt had $5,700 of debt.

The average credit-card rate ranges from about 18% for people with good credit to about 25% for consumers with a lesser credit history, according to Ted Rossman, an industry analyst for Creditcards.com

“It doesn’t make sense to pay these high rates in exchange for 1%, 2% or 3% in cash back, airline miles or hotel points,” Rossman said. “If you have creditcard debt, you need to forget about rewards and prioritize your interest rate.”

Is a cash-back credit card worth it?

For many people, it’s not.