Apple and Goldman Sachs want a piece of your wallet.
The technology company
AAPL, -0.09%
and bank
GS, +0.16%
are teaming up to create a joint credit card, according to The Wall Street Journal. The companies are still deciding what the terms and benefits of the cards will be, the Journal reported.
Both companies declined to comment on that report.
“These are two iconic brands who have lived in very different worlds,” said Matt Schulz, a senior analyst for the credit-card website CreditCards.com. The companies are looking to tap into each other’s customer bases. A card that gives rewards to consumers buying Apple products could potentially encourage them to buy more, which could be a good thing (for deals) and a bad thing (if people overspend).
Apple already offers a credit card with the company Barclaycard
BCS, +0.34%
, that consumers can use to get “special financing” on Apple products, such as no interest paid within a promotional period. This new card could work similarly, giving consumers more ways to pay for Apple products, said Brian Karimzad, vice president of research at CompareCards.com.
But would this card be a good choice for consumers?
Should you get the card?
Karimzad offered a word of caution. The “special financing” that Apple’s current credit card with Barclaycard offers can be expensive for consumers, and a new card could come with the same risks.
If consumers do not pay off their purchase completely by the end of the promotional period, or if they make a late payment, they will have to pay interest not only starting when the promotional period ends, but from the time they made the purchase. That model is called “deferred interest,” and consumers often misunderstand it.
And the interest rates are steep: Either 15.49%, 21.49% or 28.49%, depending on the consumer’s credit score.
Special financing can be helpful to consumers who do pay off their full purchase by the end of the promotional period, Karimzad said. If, however, Goldman and Apple did not use the deferred interest model, Karimzad said, “that would be a real win for consumers.”
One obvious potential benefit for Apple aficionados: Consumers using the card could receive extra rewards when spending on an iPhone. What’s more, Apple customers tend to be loyal to the brand, and that may help the card to become desirable, he said. Those who aren’t interested in Apple products—Android loyalists, for example—likely wouldn’t benefit as much.
Another possibility: Apple could offer additional rewards for consumers who make purchases when they link the card to Apple Pay, encouraging them to use it, Schulz said. Mobile payments have been slow to take off in the U.S., although they are growing.
How Apple helps Goldman Sachs
Goldman Sachs has recently amped up its offerings for consumers, including personal loans and checking accounts with no minimum deposit required, from its brand Marcus. Adding a credit card to its portfolio could help Goldman make further headway, Karimzad said. (Karimzad also previously worked at Goldman Sachs.)
“Goldman sees a big opportunity in lending directly to consumers,” he said. Tying the Goldman brand to the Apple brand could help with that, particularly if the new credit card offers special benefits to people buying Apple products, Schulz said. And Goldman could make money both on interest payments and merchant swipe fees, Karimzad added.
How Goldman Sachs helps Apple
Goldman may split the profits from its merchant fees with Apple, Karimzad said. Apple is looking for other revenue beyond its own suite of products, and will likely negotiate a deal to get a cut of purchases made on the card, said Michelle Evans, the global head of digital consumer research at the research firm Euromonitor International.
Goldman and Apple aren’t the only major brands jumping into the credit-card space recently. Uber and Amazon
AMZN, -0.18%
have both recently debuted credit cards.
Source : MTV
