Apple's 2% cash back credit card rewards are interesting, but I'm convinced people are overlooking the best part

Apple Card credit cardAppleThe Apple Card has appealing rewards, but its user-friendly elements are the best thing about it.Apple

  • On Monday, Apple announced it is launching a new rewards credit card in partnership with Goldman Sachs. 
  • Apple Card will offer 3% cash back on purchases at Apple, 2% back on purchases made using Apple Pay - including online purchases that support Apple Pay - and 1% back on everything else.
  • As Business Insider's credit cards and travel rewards reporter, I think it's a compelling offering for most consumers who are looking to earn cash back and to pay less in interest fees, but the card's tools, transparency, and easy-to-use features are much more exciting.
  • The caveat: You'll have to be an iPhone user to take advantage of the best features.

On Monday, Apple officially announced its new rewards credit card, simply named Apple Card. While the new Apple Card won't be available until this summer, Apple shared details at one of its trademark keynote presentations at its Cupertino, California headquarters.

The Apple Card will essentially be a continuation of Apple Pay, the feature that lets you use a secure app, tied to an existing credit card, to make payments at stores and online.

Read more: 8 lucrative credit-card deals new cardholders can get this month - including up to 75,000 Delta SkyMiles

The card will earn "Daily Cash," Apple's version of cash back, on every transaction. Daily Cash is issued to the user's Apple Pay Cash balance each day. From there, it can be spent on purchases using Apple Pay, applied as a credit towards the user's Apple Card balance, or transferred to contacts through Apple's peer payment feature in iMessage.

As Business Insider's resident credit card and travel rewards reporter, the Daily Cash feature was the first thing I looked for in the announcement. However, what I find most interesting, and potentially most valuable about the card isn't its rewards; I'm much more interested in its everyday user-friendly features.

 

Daily Cash is rewarding, but not groundbreaking

The Apple Card will earn 3% cash back on purchases made at Apple, 2% back on purchases made using Apple Pay, and 1% back on all other purchases.

As a rewards credit card, the Apple Card is a solid entry, but not groundbreaking. The card has no annual fee (more on that in a bit), but there are several other no-annual-fee cards that offer comparable cash back rewards, such as the Citi DoubleCash. That card earns 1% back when you make a purchase, and 1% back when you pay it.

Another no-fee card - the Wells Fargo Propel - earns 3% on dining and travel, 1% on everything else, while cash-back cards with an annual fee - like the Capital One Savor, which offers 4% back on dining and entertainment, 2% back on groceries, and 1% on everything else - can be absolutely worthwhile. 

Read more: The best credit card rewards, bonuses, and benefits of 2019

Points-earning cards, meanwhile, can offer a much higher value to users who are willing to put up with a bit more complexity.

Initial reactions from industry analysts seem to agree that better rewards can be found elsewhere. "Frankly, I'm underwhelmed," said Ted Rossman, an analyst at CreditCards.com, in a statement about the Apple Card. "Its bark is greater than its bite." 

The real benefit to the Apple Card is its consumer-friendly, convenience (and security) forward approach

The Apple Card will have no annual fees, late payment fees, foreign transaction fees, or over-limit-spending fees. It won't have a penalty APR, either, should a user make a late payment.

The lack of fees is a true differentiator, especially on a rewards credit card issued by a major bank. The comparable Citi DoubleCash charges $39 for late payments (after the first one) and for returned payments, as well as 3% fees on every foreign transaction, $5 or 3% on balance transfers - whichever is higher - and $10 or 5% on cash advances - again, whichever is higher.

Apple's Wallet app will expand to include all of the Apple Card's management tools, including displays that show the card's balance and recent transactions in real-time. The app will use AI learning, alongside data from Apple Maps, to identify and categorize transactions, making it easier to see and organize purchases.

There's also the convenience of Apple Pay, even though you can use other cards with it. According to Drew Edwards, the founder and CEO of instant payments provider Ingo Money, consumers value any service that avoids having to fumble with wallets or fill out lengthy online check-out pages.

"In our recent study on customer experience, 86% of consumers said they want convenience and speed when it comes to their money," Edwards told Business Insider via email. "This is a timely and strategic move by Apple."

 

Apple's payment tools, like the payment calculator, are extremely transparent

Despite high variable interest rates serving as a deterrent, more than 40% of US households carry credit card debt, whether due to emergency expenses or simply using credit cards, instead of personal loans, to finance major purchases.

Ideally, consumers could plan and structure payments to knock down debt faster, or use third-party tools to help refinance or reorganize debt. However, that can come with additional expenses, or be too complicated, causing users to abandon efforts.

The Apple Card, however, will offer "interest rates that are among the lowest in the industry," according to a press release, and will include built-in tools to help users pay off their balances as efficiently as possible:

To help customers make informed choices, Apple Card shows a range of payment options and calculates the interest cost on different payment amounts in real time. As a way to pay less interest, Apple Card will also suggest paying a bit more every month and offers the flexibility to schedule more frequent payments.

It isn't clear what "among the lowest in the industry" means in terms of the interest rates. However, the payment options and interest calculator - independent of actual interest rates - seem exceptionally useful.

One frequent criticism of credit card brands and issuers is a lack of transparency, particularly when it comes to actual interest costs and fees - even with the 2009 CARD Act, which required credit card companies to prominently disclose certain fees and costs.

The Apple Card calculator addresses this. It shows exactly how to pay off a certain balance in a set amount of time, and clearly displays the real impact of a given payment amount - how much you'll end up paying in interest, and how much you can save by paying a certain amount over the minimum.

Apple Card takes security seriously

Apple Card mostly lives within the Wallet app, but there will be a physical card as well to use at merchants that don't accept Apple Pay. Although the card will have a chip and magnetic strip, that's it - it won't have the card number, expiration date, or security code. If you need that information - for instance, to purchase something from a website - you can find it within the Wallets app, protected by Touch ID or Face ID.

 

People without iPhones won't get Apple Card's biggest advantages

Despite its solid, though not groundbreaking, rewards structure, the card has a few shortcomings - at least, for some consumers.

During the announcement, Apple Pay VP Jennifer Bailey described the new card as "designed for iPhone." What was left unsaid is that it's designed exclusively for iPhone. Without an Apple Pay-enabled iPhone, you'll only be able to earn 1% cash back by using the physical card (unless you have an Apple computer or tablet - then you can use Apple Pay at certain online retailers). You'll also miss out on the useful card management features of the Wallet app.

Even if you do have an iPhone, Apple Pay is not universally accepted yet. Although this might change eventually, consumers who only use the Apple Card will only earn 1% back at those retailers.

While Apple discussed a range of features at the event, one thing it didn't bring up: a sign-up bonus.

Many major credit cards, including no-annual-fee cards, offer lucrative sign-up bonuses to attract new customers. A no-fee, cash-back card like the Chase Freedom Unlimited might offer $150 when you spend $500 in three months, while other cards can offer as much as 60,000 points or more - that can easily be worth more than $750. It's worth mentioning that the Citi DoubleCash, which I mentioned above, does not usually offer a sign-up bonus.

Apple and Goldman Sachs might announce a sign-up bonus at a later point, but as of now there's no indication, which dents its efficacy as a rewards card.

The bottom line: Apple Card's rewards are solid, but not exceptional

The Apple Card is a solid rewards option, even though it's not the most competitive option out there.

What makes the card stand out is the evident "it just works" nature of its integration with the iPhone, and the informative, consumer-friendly payment information, and overall convenience. 

We may learn more when the card actually launches. Apple says it will be available this summer, and iPhone users will be able to apply right from the Wallet app.

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