Apple Card: Not every project Apple does is successful. Two excellent instances of this are the Newton and the HomePod. The Apple Card is another illustration. Opening the Wallet app on an iPhone and selecting the “apply now” button on the top card will start the application process for the credit card, which was released in April 2019. Apple and Goldman Sachs collaborated to develop the Apple Card.
Examining the Impact of Apple Card’s Credit Policies on Banks
It’s no secret that the credit practices of Apple Card have been upending the banking sector. But how exactly do these policies affect banks? Let’s have a look, then.
First, the no-fee policy of Apple Card has significantly hurt banks’ bottom lines. After all, fees for things like late payments and overdrafts are a significant source of revenue for banks. These charges are no longer an issue thanks to Apple Card.
Apple Card Interest Rates
— Apple Card (@AppleCard) August 20, 2019
Second, banks have faced significant difficulties as a result of Apple Card’s low interest rates. Rates on the Apple Card start at 10.99%, which is much less than the 17.67% average credit card rate. As a result, banks miss out on potential revenue from clients who would have paid higher interest rates.
Finally, the rewards scheme for Apple Cards has caused banks a lot of trouble. Customers are more likely to use Apple Card than other cards since it offers considerable rewards for purchases made with the card. As a result, banks are missing out on the potential revenue that would have come from customers who would have used their cards otherwise.
Therefore, it is evident that banks have been significantly impacted by Apple Card’s credit standards. While some banks might be able to adjust to the new environment, others would find it difficult to keep up. In either case, it is obvious that Apple Card has altered the playing field for banks.
How Apple Card’s Risky Credit Practices Led to a $1.2 Billion Loss for Banks in the First 9 Months of 2022
It’s hardly surprising that banks lost an astounding $1.2 billion due to Apple Card’s poor lending practices in the first nine months of 2022. After all, the “innovative” way that Apple Card handles credit has been nothing short of a catastrophe.
The Apple Card’s credit guidelines have been considerably too lenient from the beginning. It’s understandable that so many people have been able to abuse the system given the lack of credit checks, income verification, and collateral restrictions. Furthermore, it’s not surprising that so many people have amassed substantial debt thanks to Apple Card’s attractive rewards program.
But not only loose credit policies are to blame for the losses. Customers have had appalling customer service from Apple Card, frequently having to wait weeks for a response to their questions. And when they do receive a response, it’s frequently a boilerplate letter that doesn’t take their issues into account.
The outcome? A sizable quantity of unpaid debt has been left on the books of banks, and Apple Card’s reputation has taken a hit. A significant financial loss resulted from the use of “too good to be true” credit practices in this typical instance.
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