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Grading the Apple Card one year after its launch

Ted Rossman, CreditCards.com Industry Analyst, joins Yahoo Finance's Kristin Myers to take a look back at how the Apple Card has performed since its launch last year.

Video Transcript

KRISTIN MYERS: We are going to be chatting Apple, yet again. It's an Apple-filled show today. That stock is down right now roughly 1 and 1/2%. Now, the Apple Card debuted last year, and I myself do not have one. I don't know anyone who does. But it came with a lot of fanfare. Goldman Sachs CEO said, quote, "that it was the most successful credit card launch ever." But was it really?

So to chat more about this, we are joined now by Ted Rossman, CreditCards.com Industry Analyst. Thanks so much for joining us, Ted. So I guess to start off, was it the most successful credit card launch ever?

TED ROSSMAN: You know, most successful? Probably not. I might have to give that to the Chase Sapphire Reserve that came out back in 2016 and totally got millennials into this credit card craze, and luxury travel, and all that good stuff. But I have to say, Apple Card has been on the rise, even during the pandemic. I'll give you three Cs here-- contactless, cashback, and customer service. I think these are three trends that are actually giving a tailwind to Apple Card.

KRISTIN MYERS: OK, so you say a tailwind, which might be very good for them because, as I mentioned in my introduction, I don't have an Apple Card. And I, frankly, don't know anyone that does have an Apple Card. I know when we were chatting in the break, you had some interesting comments that perhaps Apple is OK with that.

TED ROSSMAN: Really what Apple's after here is the broader ecosystem. And there's a lot more regulation in the US, so they can't really do what we see tech companies doing in China, like Tencent and Alibaba, where they basically become the payment rails. They're kicking out the traditional banks.

Now, Apple's not doing that. They're partnering with Goldman Sachs. This is a Mastercard. This is on the traditional card rails. But mobile payments represent a huge opportunity. So even if you don't use the Apple Card itself, but you pay with Apple Pay with, let's say, a Chase card, or an Amex, or a Citi card, or whoever you use, they get a small slice of that.

But I think really what they're after is the ecosystem. So if they can hook you on their card, they get a bigger slice. They cement their hardware users, because you have to have an iPhone to get this card.

You can even use it kind of like Venmo to pay your friends. Maybe use your daily cashback to pay somebody back for a restaurant meal. They're after this overall deepening of services.

KRISTIN MYERS: How does Apple Card-- just for everyone out there that's doing a comparison or looking at their wallet and saying, oh, maybe I should sign up for an Apple Card, how does what they offer compare to other companies? I myself have a Chase Sapphire Reserve, so I am very familiar with all of the perks and benefits that come with that card. Does Apple Card at all stack up to the others?

TED ROSSMAN: Apple Card's a cashback card. Its primary benefits are 2% cashback when you use Apple Pay, 1% when you use the physical card. And they've added a handful of 3% cashback merchants, everybody from Nike to Walgreens, Apple itself, Panera Bread, a few other merchants like that. It doesn't have the best rewards you've ever heard of, but cashback is really meaningful, especially right now.

I think a problem that the Sapphire Reserve and other travel cards are having is they charge high annual fees. Apple Card doesn't have an annual fee. And a lot of these premium rewards cards are all about travel. So it's one thing to pay $550 a year if you're getting into the airport lounge and you're flying first class. Right now, though, I think cashback is more top-of-mind for people.

KRISTIN MYERS: I want to ask you one last question. If perhaps folks are judging Apple Card a little bit too harshly because it's Apple, and it's a tech company, and we expect a lot from them, considering we have their iPhone, their MacBooks, we have their iPads, is this at all a-- you describe it a victim of their own success. So I'm kind of wondering some of your thoughts on that.

TED ROSSMAN: Even Goldman's own analysts are saying that this won't have a material impact on Apple's earnings just yet. But I don't think that's really the whole point. I think if we judge this as something new-- so if we put different company names on this, maybe companies we haven't heard of like Apple and Goldman Sachs, and you think about a year in they have this much traction, they have this much forward-looking potential, they're trying to be a kinder, gentler card.

So they're charging no fees. They're charging less interest. They've been really generous with their hardship program during the pandemic. I think they're trying to get a community here, like they have with their phones and other devices. And I think that works for Goldman, too, because then they can cross-sell you other things, like online savings accounts and personal loans. And I think if we judge this as a startup, I think it's been a big success.