Since launching over six years ago, Apple Card has posed significant challenges for its partner, Goldman Sachs, which is contemplating a withdrawal. The outlook for Apple Card remains uncertain, but here’s a concise summary of what we know.
Goldman Sachs is reportedly eager to sever ties with Apple Card, and recent speculation indicates that JPMorgan Chase is the leading candidate to take over the partnership. Other potential contenders like American Express, Capital One, and Synchrony have also been mentioned. However, it appears unlikely that a handover will occur soon. AmEx’s CEO Stephen Squery weighed in on the prospective deal, suggesting that partnerships should enhance value and economics for both brands, hinting at doubts about the desirability of Apple Card given its customer base, which includes many subprime users. Goldman Sachs has faced losses of approximately $1 billion tied to Apple Card, contributing to a total of $6 billion in consumer product losses.
These losses stem not solely from delinquent accounts but also from the generous terms of the Apple Card. It offers no foreign transaction fees, no late fees, no refund fees, up to 3% cash back at select merchants, and 0% APR financing on Apple products.
Currently, JPMorgan Chase is seen as the “preferred option” to acquire the Apple Card partnership, though no contract has been finalized. A significant hurdle in this acquisition is the high percentage of subprime customers using Apple Card. For context, Chase charges around 15% interest for subprime customers, while Capital One applies a 31% rate. Apple Card’s rate stands at about 34%, targeting individuals with credit scores below 660. The card’s delinquency rate is around 4%, higher than the industry average of 3.05%. Thus, the new lender would need to secure the loan at a “deep discount” to make the deal viable, with total Apple Card balances exceeding $20 billion.
Another topic not widely discussed is the Apple Card Savings Account, which is also associated with Goldman Sachs. While available exclusively to Apple Card users, this savings account isn’t uniquely tied to the card. Customers can deposit Apple Card cashback into their savings, but otherwise, the connection seems limited. Additionally, JPMorgan Chase does not currently offer high-yield savings accounts, so it’s unclear if they would target Apple Card users in that capacity.
Despite its substantial retreat from consumer finance, Goldman Sachs continues to provide its Marcus savings account. It’s possible that the bank will retain its savings options, irrespective of any changes to its credit card offerings.
In summary, it seems probable that Goldman Sachs will end its partnership with Apple Card around 2026 after various discussions with financial institutions. While the future of Apple Card remains murky, considering its high number of subprime customers and the significant losses incurred, it’s likely that any new arrangement will bring changes. We might see the introduction of late fees and a general tightening of benefits.
If JPMorgan Chase doesn’t proceed, Capital One might emerge as a strong contender to fill the gap. After acquiring Discover last year, Capital One holds a notable profitability edge as both card issuer and payment network, potentially offsetting some of Apple Card’s existing losses. Only time will tell how this unfolds.
