Apple recently shared that Chase will be the new issuer of the Apple Card, marking a significant transition from Goldman Sachs. This change is expected to take place over the next 24 months. Here’s what we know regarding its implications for Apple Card users.
Why is Goldman Sachs ending the Apple Card relationship?
Back in January 2022, Goldman Sachs disclosed it had incurred losses exceeding $1 billion from the Apple Card partnership since its inception in 2020. Surprisingly, despite these setbacks, the bank had claimed it remained “committed” to the collaboration.
So, how did Goldman end up losing so much? It turns out they approved a number of customers with lower credit scores compared to their usual clientele, leading to a much higher default rate. Reports mentioned that Apple Card’s subprime borrowing rate reached 34%, which is quite a bit higher than Chase’s 15% and Capital One’s 31%. The delinquency rate for Apple Card stood at 4%—above the industry average of 3.05%. Furthermore, Goldman’s net charge-off rate was 2.93%, which is twice that of major competitors like Chase and Bank of America.
Additionally, the consumer-friendly features of Apple Card, such as the absence of fees, limited Goldman’s opportunities for revenue generation and cost reduction.
As losses persisted, Goldman opted to terminate its contract with Apple. In 2023, there were rumors that they were in discussions with American Express about potentially assuming the Apple Card partnership.
Alongside this shift, Goldman has been scaling back its consumer finance operations, including downsizing its Marcus Personal Finance brand and closing the co-branded GM credit card.
Amidst these changes, Apple was reportedly in talks with several companies to find a new issuer for the Apple Card, including American Express, Capital One, and Synchrony, ultimately arriving at a deal with Chase.
Goldman Sachs will transfer the entire $20 billion Apple Card balance to Chase, albeit at a $1 billion discount, which is rather unusual as such transfers typically occur at a premium. This indicates the urgency for Goldman to distance itself from this partnership.
Apple Card with Chase
Apple has stated that the transition from Goldman Sachs to Chase will unfold over the next two years. Importantly, current Apple Card users won’t need to take any action to switch their accounts to Chase as clarified on Apple’s website.
We’re still waiting for concrete details regarding the Chase version of the Apple Card. Apple mentioned on its site, “Apple Card Issuer Migration,” focusing on how to use Apple Card during the transition. Further information will be provided to users as the transition date approaches.
During this transition, Apple indicated:
- Current Apple Card users will not need to reapply.
- Cardholders can continue earning up to 3% in unlimited Daily Cash on purchases.
- The Apple Card will still function on the Mastercard network.
- Payment methods will remain unchanged until migration is completed, after which Chase will take over the active account’s balance.
- The Apple Card will continue to be managed through the Wallet app on iPhones.
- Your existing physical Apple Card will keep working as usual.
- Any required updates for your physical card will be communicated by Apple.
- Apple Card monthly installments will still be available for purchases made at Apple Stores or online.
- There will be no annual fees, late fees, or foreign transaction fees associated with the Apple Card.
- Post-transition, Chase will be listed as the issuing bank on users’ credit reports.
However, details remain vague on what changes Chase might implement once the transition is completed.
Apple Card Savings Account
The Apple Card Savings Account, a high-yield option for Apple Card holders managed by Goldman Sachs, is quite popular. Reports suggest that Chase intends to introduce a new Apple Savings account as part of the ongoing deal. Customers with an existing Apple Card Savings Account will have the option to either maintain their account or switch to one with JPMorgan.
Conclusion
What are your thoughts on the Apple Card moving to Chase? Do you anticipate a positive or negative outcome? Feel free to share in the comments.
