Apple Card rewards aren’t the big draw
Analyst cuts through the hype
Apple has set its sights on upending the credit card status quo.
This week, the tech company unveiled Apple Card, its sleek number-less titanium card that integrates with Apple Pay, the company's digital wallet.
The company's pitch to you: Here's a simpler, more transparent and secure credit card that can help you make smarter spending decisions. But does it live up to its own hype?
“From a rewards standpoint, from a money management standpoint and from an innovation standpoint, it doesn’t seem like they hit it out of the park. It’s ho-hum,” says Bill McCracken, a division president at Phoenix Marketing International, a market research firm for financial companies.
Are the lack of fees special?
The Apple Card has no fees. That means no annual fee, and no fees for over-the-limit spending, cash advances, late payments or foreign transactions.
“The fact Apple doesn’t have all those fees means that it’s most transparent.” Debbie Goldstein, the Center for Responsible Lending
Some of these features are pretty standard for cards. Federal regulations restrict when over-the-limit fees can be charged, and there are plenty of cards without annual or foreign transaction fees. Other Apple Card features are notable: Most cards charge late fees, with Citi Simplicity as one of the exceptions, and cash-advance fees remain common.
“One of our biggest concerns around credit cards is how fees are used to mask the real cost for the card over time,” says Debbie Goldstein, an executive vice president at the Center for Responsible Lending, a nonprofit consumer advocacy group. “The fact Apple doesn’t have all those fees means that it’s most transparent.”
How's the interest rate?
The card’s variable interest rate ranges from 13.24 percent to 24.24 percent, depending on your credit history. That compares with a national average of about 17.5 percent, says McCracken. “It’s a very broad range,” he says of Apple Card. “It looks like they’re making a play for everyone from the interest rate side.”
Apple won’t charge a penalty rate if you miss a payment, something other credit cards will levy to dissuade cardholders from missing payments.
Do the rewards look good?
You get 3 percent back on Apple purchases; 2 percent back when using the Apple Card with Apple Pay; and 1 percent back when using the physical Apple Card.
“From those looking to max out the dollars they spend to get rewards, the Apple Card is not the one I would get,” says McCracken. “It would make more sense to carry other cards with richer rewards.”
He noted that Citi Double Cash is a no-annual-fee card that offers 1 percent back at the time of purchase and another 1 percent when you make a payment. If you’re interested in earning more on Apple purchases, there also is the Barclaycard Visa with Apple Rewards that provide 3 points on Apple purchases, 2 points on every $1 spent on dining; and 1 point on everything else.
Apple also highlights the ease of getting your rewards. What you earn is added to your Apple Cash card every day, and can be redeemed for any amount right away. But several cards – such as the Chase Freedom card and Discover it Cash Back card – allow you to redeem your rewards for any amount, says Brian Riley, director of credit advisory service for Mercator Advisory Group, a consulting firm.
“The hype around being paid back every day is not that big of a deal,” he says.
How's the money management feature?
The Apple Card also organizes purchases into colorcoded categories on your iPhone to help you monitor your spending. It provides weekly and monthly spending summaries.
While these features can be helpful, they aren’t unique. Most major banks have mobile apps that seamlessly link your bank accounts, loans and credit cards onto one screen. Many can track your spending and saving, and offer alerts on account activity. Smaller fintechs offer budgeting and saving apps that can integrate your credit cards if you upload them.
One unique feature of the Apple Card is a tool that allows you to see how much interest you pay depending on the payment amount you send in.
“I think that could be very helpful for consumers to see how much they save in interest if they pay down their purchase faster,” says Goldstein.
But if anyone looking to sign up for the Apple Card – or any credit card for that matter – anticipates having a rolling balance, it’s probably best to skip a credit card altogether.
Is the security feature stronger?
Apple also highlighted its numberless card that could deter a rogue waiter from jotting down your card's number and using it to create a fake card. That sounds secure, but the widespread adoption of chip cards in the U.S. has already drastically reduced counterfeit cards, says Al Pascual, senior vice president of research at Javelin Strategy and Research, a fraud research firm.
“If it was 10 years ago, it would be more meaningful,” Pascual says. “Now it’s just security theater."
He did praise Apple Pay’s extra fraud protections. The mobile wallet generates a token number with every purchase, so that your actual card number is never associated with a transaction. If a criminal picks up the token, it’s meaningless.
But any credit card stored in Apple Pay receives the same security protections. It’s not limited to just the Apple Card, Pascual says.
Bottom line? “Do not get the Apple Card for the security,” Pascual says. “Pick the card on its other merits.”