Chase May Soon TAKE OVER The Apple Card (WSJ)

The Apple Card. Like Apple itself, it seems to have a cult following in the credit card space. The card was originally issued by Goldman Sachs, but the Apple Card has always contributed to losses for Goldman. We have reported on that over the past year or two and also on which bank may want to take over from Goldman since they won out. And well, it seems that we may now have an answer. The Wall Street Journal just came out with an exclusive article. JP Morgan Chase nears a deal to take over Apple's credit card program. In this video, we will go through exactly what we know about it. Hey credit warriors, welcome to the show. My name is Ben Hedges aka the credit shifu and on this channel I cover US credit cards, personal finance, and luxury travel. If you like the sound of that, do subscribe. But let's get into the video. So let's read through this article. JP Morgan Chase is in advanced talks to take over Apple's credit card program according to people familiar with the matter. So, it's one of those people familiar with the matter articles, but the Wall Street Journal has been right before when they came out with these types of articles. So, I do take it seriously. Discussions between the country's biggest bank and Apple accelerated in recent months with Apple telling JP Morgan it is the tech giant's preferred choice to replace Goldman Sachs as its card partner. JP Morgan and Apple have been negotiating since early last year, the Wall Street Journal previously reported. So really the news here is that Apple says JP Morgan Chase is the preferred choice for issuing the card. But there is a stumbling block in these negotiations and that is this. First and foremost is its high exposure to subprime borrowers that is affecting the price that JP Morgan would be willing to pay Goldman to take on the balances. The people said as of the end of March, some 34% of Goldman's credit card balances are tied to people with less than a 660 credit score on a scale that tops out at 850. At JP Morgan, that figure was 15%. While at Capital 1, which has for decades specialized in subprime card holders, borrowers with a credit score of 660 or lower, held just 31% of balances. So that's actually crazy that the Apple Card accepted so many subprime borrowers even at Capital 1. All right, Capital 1 is known for targeting people who are building credit or rebuilding credit after destroying their credit with bankruptcies or, you know, mispayments or whatever it is. But even at Capital 1, they're only 31% subprime. That's 3% less than the Apple Card, which in theory isn't supposed to be targeting those people, but I think in the early days, Apple wanted everyone to be able to get approved for it. And Goldman's just like, "Okay, we'll do that, you know, and then they got now they got 34% subprime." So, yeah, no wonder Chase is negotiating on price because that is risk right there. Okay, if you don't know, a lower credit score means that those people have more negative information on their credit reports. All right, like mispayments, high credit utilization, etc. And thus, they are viewed as more risky and more unlikely to pay their Apple Card bill. And 660 is pretty low. All right, that's pretty low. I find it reasonably easy to keep my credit score up in the 700s. All right. I'm often around 750 even if I run up a high balance one month or whatever, but I yeah, I I can still keep it comfortably in the 700s without any problem. The article then goes on to talk about how 4% of Goldman Apple Card holders are more than 30 days behind on payments versus an average of around 3% for the US credit card industry. But then get this, most credit card issuers make up for having delinquent borrowers by charging late fees. But the Apple Card with Goldman doesn't charge late fees, wiping out a key revenue generator. Like Apple has cut Goldman off from one of the most common revenue streams in the credit card business. They really want the card to have no fees at all. All right, so that they can put that on their website, right? No fees. But Apple, how about no fees on iPhones, too, right? You could just give them out for free, Apple, maybe. I guess it's different when you're actually running the business yourself, right? And it's not given to a partner to run. So basically to sum up this story, negotiations between JP Morgan Chase and Apple are accelerating and Chase is Apple's preferred issuer. But there are still roadblocks, namely the price Chase is willing to pay considering the number of subprime card holders. And I assume Chase would probably want to negotiate on some of the features of the card, too. Like they would probably want to be able to charge a late fee. So I'm guessing that if Chase starts issuing the Apple card, there will be some changes. And it isn't just changes with the fee structure, but also rewards. And Visa has actually offered $und00 million to Apple to change the network from Mastercard to Visa. If you don't know, in addition to the issuing bank, okay, JP Morgan Chase, uh, Bank of America, you know, whatever, American Express, you also have the card network. Uh, so you got Visa and Mastercard, which are networks that partner with banks. And you also got American Express, which is both a network and an issuing bank. Okay? say they run their own cards. So you kind of have two different things going on. Issuer which is the bank, okay, which may change from Goldman to JP Morgan Chase and then you have the network which is going to be either Visa or Mastercard. Uh it wouldn't be American Express if it's you know going to be going to Chase because Chase uses both Visa and Mastercard. We may know the answer to this question Visa or Mastercard first as Apple is expected to select a network before they pick a bank to issue the card. Most of Chase's cards, except for a notable few like the Freedom Flex, run on the Visa network. So switching to Visa would probably make sense if it's followed by a switch to JP Morgan Chase. But that is all we know about this at the current time, guys. And before we go, if you want to pick up some really amazing value by opening a new brokerage account and making a deposit with Mumu, do click the link down below. You can get five free stocks for making a $100 deposit. and stocks are worth between $2 and $2,000. Okay, but it doesn't stop there. Deposit $2,000 and you get 25 free stocks of the same value. And deposit $5,000, you get 60 free stocks plus Mets sweet tickets. And obviously, the money you deposit remains yours to do with as you please, trade stocks or whatever. Mumu is commission free and it lets you trade US and some international stocks and ETFs. That deal is only around until the end of the month, which is tomorrow. Okay, tomorrow will be the last day. So, get it while you can. Link is below. All right, guys. Thank you so much for watching. Please leave your thoughts about this whole Apple Card thing down in the comments below. Would you like to see JP Morgan Chase issuing the Apple Card? And what changes do you think will happen if they do? Please subscribe if you're new. We'll see you in the next video. Bye-bye.