Apple targets core customers with new credit card, but skimpy rewards draw criticism

Apple’s new credit card aims to capitalize on existing iPhone customers and brand devotees, but wider adoption could be slow as the consumer tech giant abandoned a flashy incentive package in favor of a basic rewards program with streamlined service to help users better manage their accounts.

With its announcement on Monday, the Cupertino, California-based company is entering the crowded and fiercely competitive field of branded credit cards. Top airlines, retailers and others hawk their own cards as a way to bolster loyalty and earn additional revenue, using lucrative signing bonuses like free miles or discounts as a way to entice customers.

Apple is taking a different tactic. At the event to unveil the card – a joint venture with investment firm Goldman Sachs, which is trying to expand more significantly into the consumer market, and Mastercard – the company touted its low interest rates, as well as the lack of annual, international and late payment fees.

It also showcased a rewards program that provides daily cash-back for purchases, bucking the traditional protocol of providing cash or points at the end of a monthly billing cycle. While those perks could be a draw for some customers, experts were left largely underwhelmed by the product given the broad array of similiar or better cards already available.

“Whenever Apple has their big announcements, they are trying to wow everyone and reinvent products,” NerdWallet’s Sara Rathner told FOX Business. “I don’t know if they reinvented credit cards yesterday.”

Other companies – like Citi’s Double Cash and Capital One’s Quicksilver cards – offer similar cash-back rewards with low-to-no fees. Meanwhile, cards like JPMorgan Chase’s Sapphire Reserve charge a high annual fee but come with a slew of perks, including access to airport lounges.

There are some differences that make Apple’s new venture unique.

The card is designed to be used exclusively on “Apple Pay,” the payment platform available on iPhones. Users will be provided a sleek, titanium credit card, but it only offers 1 percent cash back – as opposed to the 2 percent for all purchases made via the application.

For Apple, it’s a way to further boost adoption of the service, which it says has already been used for nearly 10 billion transactions and is accepted by 70 percent of U.S. merchants.

“We’re looking towards a future where all payments are made this way,” CEO Tim Cook told attendees at Monday’s event.

Apple also touted the card’s enhanced security protections – including a service that links your transactions to Apple Maps as a way to help customers prevent against identify theft – and improved monthly statements that provide not only individual transactions, but categorical spending.

The service is a challenge to applications like Mint, which provide real-time spending analysis to help customers budget.

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Apple's decision to forgo the big incentive package for new enrollees could be a sign that the industry has gone too far in offering robust rewards to draw customers. Chase, for example, scaled back its signup bonuses for Sapphire Reserve after initially losing hundreds of millions of dollars on the card.

"Issuers have gotten a bit tired of that," said Ted Rossman, industry analyst at "There is this backlash against card churners, people that get a card, get the signup bonus and dump it soon there after."


To sell the card, the company is banking on its famously strong brand loyalty and core base of customers that rely on Apple products for nearly all aspects of their life. But while experts concede that could drive interest, the firm may need to eventually offer more perks to draw in new clients.

“Compelling offers are what drive credit card signups for the most part, especially in a really crowded, really competitive credit card marketplace,” said Matt Schulz, chief industry analyst at CompareCards. “The average credit card holder with no allegiance to Apple is simply looking for a card that either has the lowest interest rate or the best rewards and they are not going to be swayed by the Apple logo.”