Chase to TAKE OVER the APPLE CARD (WSJ Report)

It seems Goldman Sachs is ready to drop the Apple card. This fact you probably already know. It hasn't proved profitable for them, and there have been multiple insider reports in the Wall Street Journal that we've done multiple videos on already. But now we have some new info on which bank may in fact take over this troubled credit card. Hey, credit warriors. Welcome to the show. My name is Ben Hedges, a.k.a. The Credit Shifu. And on this channel, I make videos about personal finance, U.S. credit cards and luxury travel. If you like the sound of that, please subscribe to the channel. And this video is brought to you by Max Rewards, but more on that later. All right, so here's the headline on a recent article in the journal. Aaron, do we have the journal? Your feelings journal? You told me to put it in the time capsule. Did you? Michael, he means the Wall Street Journal online. Oh, the wall. Right, I mean the wall. Here is their latest article on the Apple card. J.P. Morgan in talks with Apple to take over credit card from Goldman. J.P. Morgan is, of course, J.P. Morgan Chase, the bank that owns popular credit cards that we all know, like the Sapphire Preferred, the Freedom Flex, the Inc Unlimited, etc. And I'm going to read you a little bit of this article. Discussions started earlier this year and have advanced in recent weeks, but a deal could still be months away, according to people familiar with the matter. It isn't guaranteed a deal will come together because crucial details, including the price, are still to be negotiated. People familiar with the matter. I love those stories. So anyway, before J.P. Morgan Chase, Apple had apparently already spoken to Synchrony and Capital One, and Goldman had reached out to American Express about unloading the partnership to them. Goldman Sachs decided to get out of the consumer lending business and certain things about the Apple card have made it hard for them to make money, like the fact that there are no fees, not even hidden ones, and also the fact that Apple wanted as many of its 100 million iPhone users in the U.S. to get the card as possible. So Goldman Sachs ended up approving These consumers have higher delinquency rates and thus lose money for the company. So when determining what price to sell the portfolio of credit card balances for, this is going to play a role. Here is what the article goes on to say. The people said, While accounts that have high delinquencies or some other flaw can sell at a loss. So imagine you are buying a company's bonds. For example, you would look at how much the bonds pay you each month or each year and how likely it is for the issuing company to default and not pay. And if the risk of default is low and the bond pays well, then you may pay over face value and get that money back and more in interest payments over the time you hold the bonds. If the bond is very risky, you may pay face value or even under face value to take on that bond. Well, this is exactly the same thing with JP Morgan buying the portfolio of credit card balances from Goldman Sachs. If you have a load of people all paying interest and a low delinquency rate, then a portfolio of credit card balances would sell for a premium. But it seems that in this case, due to a high percentage of subprime cardholders, JP Morgan actually wants to buy it for less than the 17 billion it is worth. So what do I think is going to happen? Well, we'll get into that. But first, if like me, you have loads of credit cards that you need to keep track of and want data from all your cards displayed in one place, you have to check out the sponsor of today's video, Max Rewards. It's a convenient smartphone app that will display transactions, balances and points and rewards balances from all your cards in one place. The app also has handy things like card value trackers so you can see how much value you are getting from points and credits versus the annual fee. And also welcome bonus trackers so you can track your spending and not miss out on those valuable points. And of course, it'll tell you which card to use in which spending category to earn the maximum level of points or cashback. In addition, if you get the pro version of Max Rewards, Max Rewards Gold, it'll activate all of your Amex offers for you so you never miss a deal. You may even come home to an email saying you use an Amex offer without knowing it and save some money. That has happened to me several times. And when you have all your offers activated for you, new potentially valuable offers will actually appear in your account and get activated by Max Rewards too. You can get a free week of Max Rewards Gold and then a three month discount on the annual membership if you decide to continue after the trial ends with my code HEDGES24. Just click the link below and enter my code when you sign up. You can also just download it and check out the free features. Well, I think J.P. Morgan is not going to as easily give in to Apple's demands as Goldman was. They are the biggest bank in the U.S. with a massive consumer credit card business, not the new kids on the block in consumer lending like Goldman was when they negotiated with Apple. I'm sure J.P. Morgan Chase will be eyeing changes. Actually, that is covered in the article. J.P. Morgan also wants to do away with parts of the card program, including Apple's requirement that all cardholders receive their statement at the beginning of the month, the people said. This unusual billing structure created consumer service issues for Goldman and in turn contributed to regulatory scrutiny of the bank's consumer lending business. So basically with the Apple card, everyone's statement closes at the end of the month and they receive their statement at the beginning of the next month, which sounds convenient for the consumer. It probably lines up with people getting paid from their jobs at the end of the month, but it causes a customer service nightmare for whoever issues the card since they have to issue all of those statements at the same time and then take thousands of customer service calls from people with questions about their statements all within the same short period of time. It's not spread across the whole month like most credit cards are. But apparently Apple has signaled to J.P. Morgan that it could make this change. Personally, I think it would be great if Chase issues the Apple card. They're basically one of the top two credit card issuers in the US along with American Express. They've been successful with other co-branded cards like the Amazon Prime Visa signature card, for example, which if you look at the size of Amazon compared to Apple, they're pretty similar. Okay, Apple's a market cap of 3.5 trillion versus Amazon's 2 trillion, but they're definitely in the same league. They are both trillion dollar companies with big negotiating power. I think if Chase can make it work with Amazon, they can probably make it work with Apple as well. So I'm hopeful that they can agree a price and terms of the deal. I think the no fees, not even hidden fees thing, I don't know why I did that because it really is no fees. But anyway, I think the no fees thing may get negotiated away. While they obviously won't add an annual fee because it's a cashback card, who wants a cashback card with an annual fee? But not having a late payment fee or an over the limit fee just makes no sense. Why reward negative consumer behavior with no penalty? But what do you guys think? Would you like to see a Chase version of the Apple card? And how do you think it could change if Chase started issuing the card? Leave your comments below. And don't forget to check out the sponsor of this video, Max Rewards. You can get a seven day free trial of the pro version Max Rewards Gold and then a discount if you choose to keep it with my code HEDGES24. Link for that is below. Please subscribe to the channel if you're new and we'll see you next time. Bye-bye.