Wondering if you’ll get approved for the Apple Card? Turns out you probably don’t have to. Goldman Sachs, the bank issuing the card, is reportedly approving applications from subprime applicants, according to CNBC.
That’s not a bad thing, per se. With its payments and spending tracking features, the Apple Card was clearly built with the intention of letting customers see the benefits of paying down debt as opposed to carrying it over month-to-month. But in the post-housing-bubble era, it’s fair to look at any type of subprime lending with a wary eye.
Citing sources close to the matter, CNBC reports that Goldman Sachs won’t be handing out more credit than an applicant’s FICO score can handle, as the goal of the card is to “encourage responsible use.” The report went on to note that one new customer was approved for the Apple Card with a FICO score of about 620 said he was given a $750 limit and an interest rate of 23.99 percent. That’s actually decent if you’re credit is trashed and you’re looking to rebuild. Subprime credit cards often feature low limits, may require collateral, and have interest rates as high as 30 percent. (There’s no hard definition of subprime credit, but generally, scores under 660 prompt lenders to label you a “risky” candidate for banks.)
While it’s encouraging that you won’t get rejected out-of-hand, there are a few factors to keep in mind when applying if you’ve got less-than-stellar credit. First off, Apple markets the card as an account offering low interest rates compared to industry standards. That is, and isn’t, true. It has since updated its interest rates to 12.99 percent to 23.99 percent, and while 12.99 percent is pretty low, 23.99 is a higher than the average 19.24 percent for new cards. That’s all based on your “creditworthiness.” However, one Gizmodo commenter on a previous Apple Card story noted they were approved for a limit of $6,000 at the highest interest rate of 23.99 percent, despite having a FICO score of nearly 800. Now that could be due to many factors, but on the surface, you’d expect a lower interest rate for a higher score. A Goldman Sachs representative told Gizmodo via email that in evaluating creditworthiness, the bank considers an applicant’s TransUnion FICO score, as well as write-offs, bankruptcies, and past due payments on other credit card accounts.
Goldman Sachs did not immediately respond to our questions confirming CNBC’s report.
Here’s the thing: Banks don’t profit from being good guys. Another CNBC report notes that Citigroup, JP Morgan, Barclays (which partners with Apple on another card), and Synchrony were all interested in partnering with Apple—until they got wind of consumer friendly features like zero fees, low interest, and the app’s emphasis on paying down debt. In the report, one banker was quoted as saying “Dude, if that portfolio [Apple Card] ever makes money, I’m buying you a beer.” Bottom line: Banks like it when you carry debt because that’s how they make their profit. So it’s worth giving a closer look as to why Goldman Sachs would pick a “risky” partnership for its first-ever credit card.
Let’s do some napkin math. Using the applicant in the CNBC as an example, say you max out your Apple Card at $750 with a 23.99 percent interest. Assuming you only make the minimum payment—generally $25 per month—it would take you 47 months to pay off the debt and you’d rack up $341 in interest. Of course, that interest would be much lower at the 12.99 percent rate—totaling around $150—but that’s if you don’t use it to charge other things in the meantime. It may not seem like a whole lot to pay, but for people down on their luck or struggling to rebuild credit, it’s important to note it’s not a silver bullet either. Again, the Apple Card also isn’t going to ding you with late fees. Sure, 23.99 percent is better than the sky-high 30 percent some subprime cards offer—but it’s still Not Great.
A reminder: Goldman Sachs is a 150-year-old investment bank known for counting the uber-rich as its clientele. It also took until 2016 for the bank to admit it played a role in defrauding investors during the subprime mortgage crisis, for which it paid a $5.1 billion settlement to the Department of Justice. That’s also the same year it launched Marcus, a platform offering unsecured personal loans. CNBC notes 13 percent of Marcus loans go to subprime borrowers, while Nerdwallet notes it’s an attractive option for those with “fair to good” credit—meaning scores of 630 to 689.
None of this is to say Goldman Sach or Apple is a mustache-twirling villain looking to specifically screw over people with less-than-ideal credit. Yeah, Apple might have given a directive to accept as many customers as possible—one major reason why the card’s benefits might be so lackluster, as it has to work for everyone. It also very much wants to hook you into its Apple Pay ecosystem. Goldman Sachs very much wants to expand its presence among average consumers—probably why it’s ready to take on a potentially unprofitable venture rival banks passed on. So yes, you’ll probably get accepted if you have iffy credit, but it’s just always a good idea to give some intense side-eye to the “altruistic” intentions of banks and tech giants before climbing aboard the hype machine. And no, you’re probably not getting that super-low interest rate.