Apple is preparing to launch the Apple Card in the US in August, and has so far provided the service to a small but growing number of customers in a preview ahead of general availability. The preview is likely to be a test of the registration process, along with other elements, with applications that can be accepted or rejected within seconds after they were sent.
According to CNBC Apple Card partner Goldman Sachs apparently accepts applications from a wider range of customers than expected. While those with good credit scores are almost certain to be accepted for the Apple Card, some also with low scores find that they are getting ready to continue purchasing the card.
Some of the reported accepted customers have a FICO score below 660, which is generally believed to be the level considered "subprime" for loans and credit cards.
A customer highlighted in the report has a FICO score of around 620 and has used a subprime card from Merrick Bank, but was "absolutely shocked" that he passed the checks to get the card. In that customer's case, he had a $ 750 credit limit and a 23.99% Apple Card interest rate, a "much lower" rate than other cards in his possession.
AppleInsider discussions with applicants who accepted acceptance for the Apple Card are not limited to credit scores only, as applications with higher credit scores that were not sub-prime failed to review. It is likely that there is a restriction in advance of launching accounts that are created, although other factors are equally likely to be taken into account in the application process.
Subprime borrowers can be considered a risky proposition for financial institutions, which can be offset by higher interest rates on credit agreements. Lending to subprime is believed to be one of the contributing factors in the financial crisis a decade ago, with banks criticized for offering irresponsible mortgages.
Given Goldman Sachs' image as an investment bank, the offer of Apple Card to subprime customers seems unexpected, but it already offers subprime loans under its consumer-facing Marcus bank. About 13% of $ 4.75 billion personal loans are given to borrowers with a FICO score below 660.
According to reports from sources, Goldman is aware that it provides the card in subprime cases. It is alleged that Apple wanted the partner institution to approve as many of the over 100 million US phone users as it can, while still remaining within regulatory and lending practices responsibly.
It is said that the policy is in line with Apple's intention to provide a good customer experience.
During discussions in the late 1990s with Capital One about a potential community card, Apple co-founder Steve Jobs stated "a reluctance" to reject customers for an Apple-powered card. The ethos that probably led to Capital One being prevented from rolling out widely. However, it did not prevent Apple from having an Apple-branded hardware financing card, funded by GE Capital in the 1980s and early 1990s.
Goldman Sachs is believed to spend a lot on its efforts to become more consumer-facing, with a July report revealing that it has spent around $ 275 million since its inception in 2019 on Apple Card, Marcus and other initiatives.
Investor concerns that Apple Card is not being produced for maximum profitability have been rebuffed by Goldman's Marcus division manager Omer Ismail, by suggesting customer loyalty and commitment may be more important. "The idea of doing right by the customer means being less profitable is not just an idea we subscribe to," advised Ismail. "If you do it right by the customer, you will eventually win their loyalty."