The Apple Account: A Revolution In Savings?

0.25%. That’s the rate that most people are used to seeing when they open their phone to check their savings account on their banking app. Some might be lucky and get a higher rate, while others might have a rate as unfortunate as 0.1%. 

However, the average inflation rate over the last decade is 2.75%, so if in 2013, you invested $1,000 into a savings account at a 0.25% APY—annual percentage yield, or the amount that your investment increases in a year—what would that look like today? Well, it would only have the buying power—the amount of goods or services a dollar can buy—of only $750 in 2013’s money one decade later, or 25% less. That’s the equivalent of being able to get a full extra Chromebook. This doesn’t mention the other downsides to most savings accounts, like excessive withdrawal fees and more.

Enter Apple: a personal technology titan that’s partnering with Goldman Sachs to revolutionize the banking industry by expanding their existing infrastructure from Apple Wallet. Their 4.15% interest rate soars past the inflation rate by over 1.5 times, meaning that if we kept stead at a 2.75% average inflation rate for the next decade, your $1,000 is now worth over 15% more instead of 25% less, and you’ve passively made over $150 dollars.

The Apple Card

So, what is the Apple Card? The Apple Card is a card provided by, as its name entails, Apple. This credit card, one of the strongest attempts by a non-brick-and-mortar bank (or neobank) to break into the field of finance, already offers very competitive benefits. Firstly, they make signing up as easy as filling out a form in the Apple Wallet, as Apple forgoes a hard credit check. In fact, within ten minutes, you can start spending because they give you a credit limit as soon as you sign up. I know what we’re all waiting for, though: the benefits.

At the low end, they offer 1% on any purchases made with the physical titanium card. Then, we move to 2% on any Apple Pay purchases through the card. and a whopping 3% on not just Apple and Apple products, but also a slew of merchants including Uber, Nike, and Walgreens, a deal offered by nearly no other credit card out there. Above all, all cash back is unlimited and lets you spend it instantly. Oh, I haven’t told you about Daily Cash yet?

Getting Paid To Spend

Chase and American Express, two of the foremost credit card companies known for their high-fee, high-reward cards, both have point systems that can only be redeemed through their credit card portal or app. This bears a problem when consumers want easy access to their cashback.

However, Apple works differently: they allow you to redeem and spend your rewards instantly as Daily Cash, something that can either be moved to Apple Cash and spent instantly, transferred to your Apple account and saved at a 4.15% interest rate, or even used to pay off your Apple card balance in under ten seconds. Best of all, the Apple Card has no annual fee, so you get all these benefits for the price of using the card.

In Goldman Sachs We Trust… Right?

How can we trust that Apple will handle our money safely, though? They’re a tech company, and although they might have the largest cash reserves of any private company, they’re still not experienced in the world of finance. Well, not to worry, because currently, Apple’s finance division is backed by Goldman Sachs, one of the leading banks in the world. 

However, it’s been reported that Goldman Sachs is trying to back out and pass it off to American Express, as they’ve lost $1 billion on their partnership with Apple. According to the Wall Street Journal, the $1.2 billion loss comes from the Apple Card’s lack of late fees, the net 2.93% of customers who can’t pay their bills for over six months—known as a charge-off—which prevents them from collecting interest payments, and that over 25% of their credit card loans go to people with a credit score below 660, meaning they’re high risk customers for banks. 

Both the charge-off rate and the low-credit-score loan rate are double that of banks like Chase and Bank of America, who give out card loans to low credit consumers at a 12% rate and a floor-scraping 3.7% rate, respectively. Their push into consumer finance was one that they simply didn’t have the manpower or experience to handle, and it shows.

Neobank: Sink or Swim

The last quirk about Apple’s venture into finance is something that consumers have probably realized: there are no brick-and-mortar Apple banks. That’s because Apple doesn’t have a banking license. In fact, they’re not even the one providing the funding, they’re just a front for Goldman Sachs Bank USA, which has a state charter and is FDIC-insured. 

In reality, Apple is a “Neobank”, meaning they have no physical locations, but unlike others that tried to do what it’s doing, its brand strength is unparalleled. Additionally, unlike other Neobanks, Apple has a history of being consumer-first in their approach to data, and when financial data is brought into the game, consumer privacy develops a new level of importance.

What does all that mean? In simple terms: 

1. The Apple Savings Account offers one of the best rates out there: 4.15%, up from a national average of 0.25%.
2. The Apple Card is a new player from Apple and Goldman Sachs that offers competitive cashback and is easy to sign up for.
3. Apple’s cash back is straight cash deposited straight into your Apple Wallet, available for spending immediately.
4. Apple’s partnership with Goldman Sachs seems to be hitting some turbulence, but hopefully American Express comes in to continue our friendly neighborhood tech-megaconglomorate’s venture into finance.
5. If the Apple Card and savings account suddenly fail, Apple can deflect all fiscal backlash and PR backlash to their finance partner, coming out of any debacle nigh-unscathed. 

So, will Apple completely shake up the finance industry forever? As of right now, not really. Are they a great deal for consumers? Yes. Are they the strongest push by a Neobank into traditional finance? Yes. However, for now, traditional banking remains strong and unlike many former titans in other industries, they’re adapting to the digital world of banking. Rest assured, this decision will definitely make waves in finance for years to come, as Apple brought tech into the field of finance at warp speed, and all the other titans will be adapting to the pace they’ve set.