Goldman's Apple Card Business Has a Surprising Subprime Problem (cnbc.com) 70
Goldman's credit card business, anchored by the Apple Card since 2019, has arguably been the company's biggest success yet in terms of gaining retail lending scale. It's the largest contributor to the division's 14 million customers and $16 billion in loan balances, a figure that Goldman said would nearly double to $30 billion by 2024. But rising losses threaten to mar that picture. CNBC: Lenders deem bad loans "charge-offs" after a customer misses payments for six months; Goldman's 2.93% net charge-off rate is double the 1.47% rate at JPMorgan's card business and higher than Bank of America's 1.60%, despite being a fraction of those issuers' size. Goldman's losses are also higher than that of Capital One, the largest subprime player among big banks, which had a 2.26% charge-off rate. "If there's one thing Goldman is supposed to be good at, its risk management," said Jason Mikula, a former Goldman employee who now consults for the industry. "So how do they have charge-off rates comparable to a subprime portfolio?" The biggest reason is because Goldman's customers have been with the bank for less than two years on average, according to people with knowledge of the business who weren't authorized to speak to the press.
Charge-off rates tend to be highest during the first few years a user has a card; as Goldman's pool of customers ages and struggling users drop out, those losses should calm down, the people said. The bank leans on third-party data providers to compare metrics with similar cards of the same vintage and is comfortable with its performance, the people said. Other banks also tend to be more aggressive in seeking to recover debt, which improves competitors' net charge-off figures, the people said. But another factor is that Goldman's biggest credit product, the Apple Card, is aimed at a broad swath of the country, including those with lower credit scores. Early in its rollout, some users were stunned to learn they had been approved for the card despite checkered credit histories. "Goldman has to play in a broader credit spectrum than other banks, that's part of the issue," said a person who once worked at the New York-based bank, who asked for anonymity to speak candidly about his former employer. "They have no direct-to-consumer offering yet, and when you have the Apple Card and the GM card, you are looking at Americana."
Charge-off rates tend to be highest during the first few years a user has a card; as Goldman's pool of customers ages and struggling users drop out, those losses should calm down, the people said. The bank leans on third-party data providers to compare metrics with similar cards of the same vintage and is comfortable with its performance, the people said. Other banks also tend to be more aggressive in seeking to recover debt, which improves competitors' net charge-off figures, the people said. But another factor is that Goldman's biggest credit product, the Apple Card, is aimed at a broad swath of the country, including those with lower credit scores. Early in its rollout, some users were stunned to learn they had been approved for the card despite checkered credit histories. "Goldman has to play in a broader credit spectrum than other banks, that's part of the issue," said a person who once worked at the New York-based bank, who asked for anonymity to speak candidly about his former employer. "They have no direct-to-consumer offering yet, and when you have the Apple Card and the GM card, you are looking at Americana."
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This is because of the Apple Card and Apple making them approve loans that no one else woulds, right? Because the Apple Card is yet another way to force people to stay within the bounds of the Walled Garden. Now you don't have to worry about losing just your "blue bubbles" if you leave for a better platform, you have to worry about losing access to your credit card entirely as well as the way you've been paying off your credit card balance.
Of course, Apple has something like $200 billion in cash reserves. A
Re:Just another Goldman ripoff (Score:4, Informative)
Because the Apple Card is yet another way to force people to stay within the bounds of the Walled Garden. Now you don't have to worry about losing just your "blue bubbles" if you leave for a better platform, you have to worry about losing access to your credit card entirely...
This is totally not true. You can get a physical Apple Card. Nobody is "forcing" anybody to do anything.
... as well as the way you've been paying off your credit card balance....
So you can just pay it via the web...just like how people typically pay a credit card payment. Right here: https://card.apple.com./ [card.apple.com]
Doesn't even require an iPhone.
Besides all that, most people with a credit card have more than one credit card anyway.
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This is totally not true. You can get a physical Apple Card. Nobody is "forcing" anybody to do anything.
What you're leaving out is that you pay a higher rate if you don't use the card with Apple Pay. Sure, you can use it as a regular card (sort of - there are actually limitations to that as there's no number printed on the card and the only way to get a number is through Apple), but it's not only less useful without the paired iPhone, it's also more expensive.
So you can just pay it via the web...
I said "the way you've been paying off" not "the only way to pay" - Apple heavily pushes you to the Wallet app on iOS as the way to manage the Apple Car
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What you're leaving out is that you pay a higher rate if you don't use the card with Apple Pay.
I left that out because it isn't true.
You absolutely do NOT pay a higher interest rate because you used the physical card rather than Apple Pay.
What IS true is that you get more "cash back" by using Apple Pay. So what?
I said "the way you've been paying off" not "the only way to pay" - Apple heavily pushes you to the Wallet app on iOS as the way to manage the Apple Card. Everything in their marketing pushes you in that direction.
Again - so what? The WHOLE POINT of the card is the integration with the phone. THAT'S THE PITCH!! That's why one would get and use the Apple Card as opposed to the many other cards out there that offer better benefits than the Apple Card. It's CONVENIENT AS FUCK! If you are not interested i
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AmEx Delta Platinum, my Chase Sapphire Preferred, my Chase United, my Chase Southwest Air, my Citi Costco Visa, and various other cards. That's why it is my "daily card".
I'm sorry but WTF. Is that normal in the USA? I have 2 credit cards, one is a work card for corporate expenses and the other is my bank's which gets used on booking.com and ... no I think just booking.com. Actually the only reason I got it is because you can't hire a car without a credit card.
Why would you have so many?
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there is no centralized registry for consumer cc deb
https://en.wikipedia.org/wiki/... [wikipedia.org]
Happy to help.
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My guess is marketing. In the US you are constantly bombarded with credit card ads by air, land, and sea. They're all the best card ever, no other card gets you a 10 cent/gal discount at participating Exxon stations, or the chance to win a free vacation, or whatever the ruse is that day. Every time you turn on the TV, open the mailbox, or fire up your laptop. It's not unusual for them to send you an actual physical credit card, unsolicited, with instructions on how to sign up for the credit itself.
All that
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For example amazon has a card, you get 5% back on purchases on their website. That is a really big rebate obviously. So I got the card, put it on autopay, and forgot about it, it's in a drawer somewhere. I have never used it anywhere else. But now we get 5% back on all our amazon purchases with no extra hassle.
What this amounts to is a way to charge every customer a different amount depending on whether they ar
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I tend to go the other way, happily paying extra to avoid doing business with Amazon. The last time I bought something from them, they were mostly selling books.
Re: Just another Goldman ripoff (Score:2)
You can look it up, but I think the stat is something like the average person has 5-7 cards.
I have so many because they have different benefits. If I want miles, or airline benefits, I use that card. If I want max benefit at Costco, I use that card. Etc. etc. etc.
Most of my cards go completely unused most of the time. When I want the bonus being offered by a card, I apply for it, so whatever needed to get the bonus, pay it and put it in the safe with the others.
In any given month, I typically pay cards as f
Re: Just another Goldman ripoff (Score:2)
And just to be clear, I don't keep a balance
On anything. I pay them off monthly, unless I have some 0% deal going on.
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Why would you have so many?
Banks want you to, basically. Credit scores in the US incentive you to have multiple active accounts. For reasons beyond me, they interpret more credit accounts and debt as a sign of responsibility and ability to manage credit; these make your credit score higher, which makes your overall cost of living lower as it lets you pay less interest and fees, qualify for your own lease versus needing to get in with a roommate, etc. Its basically impossible in the US to get your credit score high enough to qualif
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| for reasons beyond me, they interpret more credit accounts and debt as a sign of responsibility and ability to manage credit;
The reasons are
(1) the banks that issue the card do more underwriting, like knowledge of income, debt and assets, so that the fact that someone has more than one credit line open in good standing has positive correlation to low credit losses. There is no record of rejected credit applications, only the absence of credit lines.
(2) more credit accounts open for longer, and still in
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I'm sorry but WTF. Is that normal in the USA? I have 2 credit cards, one is a work card for corporate expenses and the other is my bank's which gets used on booking.com and ... no I think just booking.com. Actually the only reason I got it is because you can't hire a car without a credit card.
For better or worse, yes. Certain stores have certain perks, cash back, etc. when you use the store card in that store. It's also impossible to get a sizable loan without extensive positive credit history (having a car
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Why would you have so many?
Different cards for different uses. I have one primary card I spend on day-to-day, and which gives me cashback rewards. Another which has a 0% fee on foreign transactions, for when I'm travelling. Not used that one for a few years... And another which is tied to a Euro account.
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The WHOLE POINT of the card is the integration with the phone.
So why are you arguing with the guy who said "Because the Apple Card is yet another way to force people to stay within the bounds of the Walled Garden."?
You seem to think those are not as synonymous as they are.
Re: Just another Goldman ripoff (Score:2)
They're not.
Nobody is forcing anyone to get an Apple Card. Nobody is forcing anyone to buy an iPhone either.
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Objectively, it is true. With the apple card you get 3% back at certain retailers, 2% back when you use contact-less apple pay, and 1% back when you use the physical card or the virtual card in online purchases. It's only 1% difference, but it is 1% more money in your pocket than you'd otherwise have, all else being the same.
If I'm a seller of gew-gaws and do-dads and come up to you and said "If you don't lay on y
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Goldman et al are responsible for the catastrophe of 2007, and I get modded down for reminding people of it. Is somebody here trying to defend them? Or is this just part of their regular abuse?
Of course the taxpayers will be on the hook, once again, not Apple, much less Goldman... Sad that the lessons still go unlearned...
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Goldman et al are responsible for the catastrophe of 2007, and I get modded down for reminding people of it. Is somebody here trying to defend them?
If you wrote the GP's post then that's not why it was modded down. You were modded down because the main and singular point of the entire post was a load of shit.
Of course the taxpayers will be on the hook
Why would they? It's not like a few 100 million worth of credit on consumer cards will move the dial on this. You know enough about Goldman to know their involvement in the 2007/8 crisis, so go look at the numbers and the impact to people themselves to get some perspective on why the industry was bailed out. Hint: It's in a different order of magni
Re: Just another Goldman ripoff (Score:3, Interesting)
Re: Just another Goldman ripoff (Score:2)
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Apple actually values privacy
They like to have that image, but I'm not much convinced about it. I think most likely, they simply abhor others vacuuming data off their cash cows.
Re: What a short memory you have (Score:2)
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[...] you have to worry about losing [...] the way you've been paying off your credit card balance.
There is no need to worry. The collection agency will accept many forms of payment (perhaps even iTunes gift cards!) or, if one ends up in bankruptcy, I'm sure Goldman will happily accept their share of ones assets in whatever form the court offers it.
Don't you need good credit to get an Apple card? (Score:2)
Bankrate reported that applicants with less than a 600 FICO would not qualify for an Apple card. And 600 is a respectable credit rating.
Now CNBC says that they were giving them to anybody?
Who's right?
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Could be both:
More than a quarter of Goldmanâ(TM)s card loans have gone to customers with FICO scores below 660, according to filings.
It's entirely possible that a quarter of their cards were given out to people in the 600-660 range.
That being said, since the Apple Card is essentially just another way for Apple to lock their customers to their platform (imagine your credit card literally being tied to your phone - you'd have to be a complete idiot to do that), I wouldn't be surprised if Apple leaned on them to allow riskier customers access to the card.
Re: Don't you need good credit to get an Apple car (Score:3)
Apple did encourage Goldman to be open-minded with granting credit.
Yes, the card is integrated with the phone. It's convenient. But hardly required. Once you have the card you need never turn your phone on again to use the card and pay your balance.
Nothing idiotic about it, since most people have more than one cars anyway.
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Well, sort of...
They do send you a physical card...kinda cool looking, metal, hefty, etc.
However, if you use that, you only get 1% back.
To get the 2% cash back, you have to use Apple Pay electronically to get that, and also to get the 3% back on certain purchases and also on Apple store purchases.
So, to fully get the full c
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Hey, my friend has a Costco credit card that gives you a higher percentage back when you use it at Costco. What a sucker hey?
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I have a Costco card too...and that's the reason I use it for my purchases AT Costco.
It also pays a higher rate for gas purchases and I believe restaurant purchases....so, I use it for the most cash back from those places.
I use Apple Card for when its the same cash back as Costco visa (for convenience) and better.
Also, with Costco visa, you only get the cash back once annually in
Re: Don't you need good credit to get an Apple ca (Score:2)
And to get 2x miles and free baggage benefits at Delta.com, I have to use my AmEx Delta Platinum card. So what?
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"That being said, since the Apple Card is essentially just another way for Apple to lock their customers to their platform..."
Funny how providing a device and experience that's largely secure, private, and hassle-free actually encourages people to use it.
And I suppose it could be lock-in... if it happened to be the only card I owned.
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And 600 is a respectable credit rating.
How the hell is 600 considered "respectable" ?
Re:Don't you need good credit to get an Apple card (Score:4, Informative)
600 *is not* a respectable credit rating.
700 and above is a respectable rating. 650-ish is average and above that is good.
600 is sub-par.
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Right .... If they were accepting people with 600 credit scores, there's a *good* change a lot of them were taking advantage of the 12 months' no interest offers on new notebooks or phones and then not making the monthly minimums required. (Don't forget, if you charge more things to the card while you have one of these no interest payment plans going? It will apply payments towards the additional items charged to the card before applying any of it to the monthly payment owed on the Apple purchase. So some
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Don't forget, if you charge more things to the card while you have one of these no interest payment plans going? It will apply payments towards the additional items charged to the card before applying any of it to the monthly payment owed on the Apple purchase.
Nope, that's now how it works with Apple Card. The installment portion becomes part of the minimum balance due. If you pay the minimum balance due, your payment is applied to the installment before other charges.
That also makes sense for Goldman if you think about it. They're going to apply your payment to the 0% portion (due) of what you owe before applying it to the 16%+ interest bearing portion of what you owe.
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Oh, ok. I may have it backwards then. Seems like last time I had a similar offer with a Micro Center credit card though, it was as I stated. What they did was expect you paid the monthly portion of the "no interest for 12 months" payment plan, or else you were hit with late payment fees? Just because you had 12 months of 0% interest didn't mean you could opt to skip paying anything towards it in a given month, or pay less than the 1/12th. of the total cost they gave you on a given bill.
Re: Don't you need good credit to get an Apple car (Score:2)
Generally the way a 0% offer works is that you have to pay a min amount monthly. If you fail to do so, they can move that 0% balance to the full rate.
The other way they typically work is that they're 0% unless you miss a required min payment, then you're charged the full rate going back to the original charge date.
I've not kept up on things though. The most recently legislation, called the CARD Act I think, reduced or eliminated a lot of shit that card issuers used to do.
Re: Don't you need good credit to get an Apple car (Score:1)
That isnâ(TM)t entirely correct. All payments must go towards the oldest charges. You canâ(TM)t keep accumulating interest on things that are higher interest simply because you have a wide range of interest rates.
So if you start with a $1000 balance at 16% and add another $1000 at 0%, the balance at 16% is paid off first, then you may be on the hook for the 24% or any fees after the 0% expires (some credit cards make the entire period of interest due if not paid on time).
Besides that, the Apple Ca
Re: FICO #'S are BS anyway (Score:1)
Re: FICO #'S are BS anyway (Score:2)
" is auto paid from the checking, no balance"
It's counter intuitive but you will get more of a bump in the score if you do not pay the entire balance every month. They want to see you take out a debt then pay it down. If all you do is pay the whole bill every month that doesn't happen.
HOWEVER - IT DOESNT MATTER. The dirty secret is any score above around 750 is irrelevant. There is absolutely zero difference in what interest rates you will qualify for with a 750 vs 800 vs 850 score, it matters a lot more wh
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Apple uses these cards, I think, for customer acquisition. I actually had two branded cards from Barclays. My credit score was higher when I got the second, but my Apple Card gotten years earlier when my credit was worse had a credit limit 10X as high.
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I got approved for an Apple card right around this time of year back in 2019. At the time I had no credit, as the great recession had screwed me over pretty good and I had to wait for a bunch of crap (relating to having to short sell my home and expenses incurred in the process - not hookers and blow) to age off my credit report.
I'm glad they did approve me, because rebuilding credit when no one wants to approve you in the first place is an annoying catch-22. Yeah, I realize there are secured cards that e
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I have a six figure credit limit on cards from Chase and others. Meanwhile I can charge a whopping $5000 on the Apple Card.
I reckon their trouble is they don't give high enough limit to people with good credit....
My highest limit card is the Chase United card, which has a $36K limit. I have a number of other cards with $25K limits. My Apple Card has a $19K limit. All are way more than I actually need (altogether my total credit card limit is around $230K).
My wife has a $60K limit on her Chase Sapphire card. I wonder what kind of limit she would get with the Apple Card? I dunno, but I bet it is a lot more than $5K.
They're good at it all right (Score:5, Insightful)
Goldman manages risk knowing no matter how bad they are, the taxpayers will always be there with billions of their dollars so the flunkies at Goldman won't miss their bonuses.
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They make money.
At a 3% default rate, but then a near double balance $30BN. This is a annual loss of $900M ...but...
Say they only have a 20% interest rate fee (probably varies by credit rating but this is a good median) - Annual revenue of $6bn
If they somehow jump to 5% default, then I would expect both interest rates to climb (especially on those with low credit ratings) as well as new card activations to be at a higher rate...all the way to 28%.
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Nope. Goldman manages risk knowing that if they make small fuckups they are on the hook. To qualify for a bailout you really need to threaten to make a portion of America homeless.
As the saying goes:
If you owe your bank $100000 you have a problem.
If you owe your bank $1000000000 the bank has a problem.
No finance company is getting bailed out over pathetically small credit card loans with a sub $bn pricetag.
It's a UI/UX problem, believe it or not! (Score:3, Interesting)
Hear me out: The Apple Card has this UI on the phone where you can supposedly control your next payment amount. Say your balance is $2,000 and you can only pay $400 this month, you can swipe this cool looking circular widget. It calculates the interest rate for the amount you're picking.
Unfortunately, every time you move that slider and submit, that's a NEW payment which does NOT replace the previous payment. Let's say you were paying off $500/month, and you now select $400, you'll be charged $500 AND $400 for a total of $900. Pretty nasty surprise for most people, if you ask me.
This happened to me several times, over several months. It took me a while to figure out what was going on, and I confirmed it on a phone call with their support staff. The way it functions is extremely counter intuitive, and I can totally see how it screwed with a lot of customer's cash flow to the point of preventing them from making payments.
Re: It's a UI/UX problem, believe it or not! (Score:2)
I find that UI completely intuitive and pretty slick. Never been an issue.
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Never been an issue.
You replied to someone whose issue was big enough they had to contact support staff. Literally any counterpoint you make is irrelevant. The only way the UI would be "completely intuitive and pretty slick" is if both you *and* the OP are both happy. If one of you isn't, then the UI isn't intuitive or slick enough.
You not having a problem does not solve the OP's issue.
The difficulties seem to confirm (Score:1)