NEW Apple Credit Card 2019: Rumors and Breakdown

What's up you guys? It's Graham here.

So the credit card community has been pretty quiet lately. Sign-up bonuses are dwindling, Chase Sapphire is cutting back on some of their benefits, and I thought I was done making credit card videos like this because it really hasn't been that much new to report on. That is until now.

We should probably cue in some really scary dramatic music right now, maybe throw in some lightning and thunder, because we got two big power players that are teaming up in 2019 to bring you the credit card of 2019: the Apple credit card!

So, just like any credit card nerd would do, I stayed up really late last night doing some heavy research to find out exactly what's confirmed, exactly what's rumored, and some of the things that you could expect to see with this card.

Now, here's some background on this: Apple is teaming up with Goldman Sachs to bring us a new credit card in 2019. The credit card is going to be running through the MasterCard Network, which is currently the second-largest credit card processor in the entire universe. As of now, Apple stated that they first plan to test this out among employees before beginning to roll it out to the general public later on this year.

They also announced that they're going to be offering 2% cash back on purchases, as well as advanced integration into their Apple Pay app, which should potentially better allow users to track their saving and spending. Some executives have said that the payment tracking could be somewhat similar to the fitness app, where it would reward users if they meet or exceed certain budgeting or savings goals.

Besides those confirmed statements, we really don't know much more about exactly what this credit card is going to be offering. We don't know if this credit card is going to have an annual fee, we don't know if it's going to offer any sign-up bonus, and we have no idea if they're going to offer higher tiered rewards if you use their credit card to buy Apple products.

Which, let's be real here, if you're using their credit card to buy their own product, chances are they're going to offer some sort of incentive with that. Now, on the surface, this doesn't appear to be too revolutionary of a credit card, besides the fact that this is just coming from Apple. So why is Apple doing this, and could they actually turn this into a successful smash hit of a credit card, somewhat like the Chase Sapphire Reserve was?

Well, to start, I think it's a really unique market for Apple to get into, for a variety of reasons. And it's not really surprising that they're beginning to implement this now, as the iPhone market is, in my opinion, reaching a point of diminishing returns. The newer phones aren't really that much different from the older models, and raising prices just deters people from upgrading when their current phone works just as well and doesn't cost over $1000.

This is evidenced by their 15% decline in iPhone sales in the first quarter and a 5 percent decline in overall revenue. However, Apple has amassed such a large loyal following within the Apple ecosystem, with over 1.3 billion active devices worldwide. From a business standpoint, I think it becomes much more pertinent to begin growing a business of long-term stable recurring revenue, which would be for them—drumroll (that's a bad drumroll)—the Apple business ecosystem.

This includes some of the revenue from their App Store, Apple Music, and Apple Pay. In a recent Apple earnings report, they announced that their services revenue had ten point nine billion dollars, which was an all-time high and a 19% increase from the previous year. So it makes sense then, from this perspective, that Apple would begin to invest more into a new venture that would generate monthly revenue than it would be by relying on continuous iPhone updates and sales.

And let's be real here, as someone who's followed Apple very closely, there's only so many times you can revolutionize and reinvent the iPhone before it just becomes pretty much the same thing. And when it comes to profit, the credit card industry is pretty much just a license to print money. For instance, American Express made 10 billion dollars in revenue in 2018 with a hundred and twelve million active credit cards, and much of that was through annual fees, transaction fees which range anywhere from one and a half to two point nine percent, and also interest charges.

Now, those numbers are impressive until you compare them with Apple and their iPhone being the number one most popular smartphone in the entire world, with over 2 billion devices sold. This means that Apple could potentially target every single one of their iPhone users with an easy-to-integrate credit card offering 2% cash back.

And this could be a massive game-changer for the credit card industry, especially if Apple finds a really clever and unique way to sync or integrate that credit card with the iPhone that incentivizes people to use that card over any other card they may otherwise use. Even more so if they offer an incentive for people to maximize the rewards of using their Apple credit card when making Apple-related purchases.

This could also be a very smart way for Apple to essentially finance their own products to increase revenue without having to increase sales. This way, not only do they make the sale, but they also get paid interest on top of that as well if the customer doesn't pay off the credit card in full. Or maybe they'll offer 0% interest if you use the Apple credit card to make Apple-related purchases, which would incentivize people to spend more with Apple.

Their partnership with Goldman Sachs is also quite unique and strategic. In 2016, Goldman Sachs launched an online bank called Marcus to offset their sharp decline in securities trading, and I gotta say, Marcus was extremely successful at this with 35 billion dollars in deposits. They were able to compete with other online banks like American Express and Ally while still offering a premium service and a slightly higher interest rate.

I think their partnership with Apple means two things: one, they could leverage Apple's loyal fan base to increase their business towards their banking and lending services; second, they could expand their consumer industries market with a credit card. In return for this, Apple could potentially form other partnerships in the future with Goldman Sachs for things like lending, financing, and other banking services, which is absolutely something that Apple is currently lacking.

So from my perspective, I see this partnership as really just being a win-win for both companies. However, I believe there's one more potential reason why Apple wants to get into this business that hasn't really been widely discussed yet, and this is where I think the real money is. Just go and ask Mark Zuckerberg, because that would be consumer data.

Once Apple integrates their own credit card into your phone, they should be able to successfully analyze and track how you spend your money, how much money you spend, where you spend your money, what you're most likely to buy, and then use that information to retarget you with other financial-related products or services that they think you might be interested in. They can utilize this to make a considerable amount of money on the back end by just being able to predict what you're most likely to purchase.

And with this, Goldman Sachs gets introduced within the entire Apple ecosystem, which is pretty much a world-dominating force of nature. So let's wrap this up with just a few final thoughts. How well do I think this is actually going to do as a credit card? To be honest, I think this is going to do well, really well.

If they're going after the majority of the audience out there who pays with debit cards, doesn't follow credit card rewards very closely, and simply wants a very convenient credit card to use, Apple is going to do extraordinarily well by simply just offering 2% cash back. This directly competes with other cash back credit cards like the Citi Double Cash while still offering iPhone integration in a way that might make saving, budgeting, and spending just a little bit more easy or a little bit more fun.

However, even with offering 2% cash back, the Apple credit card could still lag behind other credit cards in terms of benefits and services. For instance, you have the Discover it which offers 5% cash back on revolving categories or the Chase Freedom which also offers 5% cash back on revolving categories or the American Express Blue Cash Preferred which gets 6 percent cash back on supermarkets.

And all of this, by the way, has a sign-up bonus worth at least 150 dollars or more. For the really intense credit card users out there who really want to squeeze as much value and bang for the buck from these cards as possible, I still think it's safe to say that they're gonna get a better value from cards like the American Express Gold, Platinum, or Chase Sapphire, which offers substantial signup bonuses that are redeemable for travel and hotels.

Even with the annual fee, these cards could be quite profitable when used correctly. And this doesn't even account for the myriad of other perks and features that these cards have, such as warranty protection, purchase protection, added insurance, and customer service, of which it's not really clear if Apple is going to try to match or compete with any of these offers.

And it's also no surprise that in the credit card space there is a lot of competition. Every credit card is vying to try to get you to use them and sign up, so much so that they're willing to run at a loss just for the sake of customer acquisition, which is exactly what happened with the Chase Sapphire Reserve when they offered the hundred thousand points sign-up bonus.

That happened about two years ago. It became a loss leader for the card and the company, but it boosted their entire business, disrupted how Millennials viewed credit cards, and got a lot of people into the game of credit card churning and using credit cards as a means for free travel.

I think it's pretty safe to say that Apple certainly has the budget to offer some pretty crazy incentives if they wanted to, which would be good for the company long term, especially if they're venturing into this and they really want to make an impact. This would be the best way for them to do so.

And unlike the Sapphire Reserve, who had to make some drastic moves to get attention in the credit card space, Apple has no problem getting enough attention, as evidenced by everyone talking about it, including myself, and the credit card isn't even out yet. If Apple took it a step further and offered a sign-up bonus with no annual fee, and also offered 2% cash back, even if it's just a temporary promotional offer, I absolutely would go for it.

And even if it's only 2% cash back with no annual fee and easy iPhone integration, it still seems like a pretty decent credit card to get. And if they offer better rewards on Apple products that I was going to buy anyway, like let's say a longer warranty or maybe some sort of extra cash back, then you know what? I'm all for it!

But of course, we're going to have to wait and see until all the details are confirmed and the credit card is released to really decide if it's a good card to add to the credit card collection. But one thing is very clear: if Apple is successful and actually pulls this off, then I think not too much later, we'll probably see the brand new Samsung credit card coming out.

So with that said, you guys, thank you so much for watching! Before you click out, really quick, just smash that like button. It helps with the channel dramatically if you enjoy videos like this. Also, make sure to subscribe and smash that notification bell so YouTube notifies you anytime I post a video.

Also, feel free to add me on Instagram. I post there pretty much daily, so if you want to be a part of it there, feel free to add me there. Thank you again for watching, and until next time!