Last year I remember seeing some stories about GS’s issues being caused by people defaulting on the card. It isn’t hard to get approved, so if you have even a middling credit score you can get the credit card. So at first it made sense that a bunch of people who probably shouldn’t have been approved for a credit card got one and got in over their heads.
That being said, the idea of people just not paying interest makes more sense to me. The Apple Card is probably the easiest card to see how much your balance impacts the interest paid. I’ve had the card since it came out and have never paid a dime of interest. I also only use it with Apple Pay meaning at minimum I get 2% cash back. Add to that, the savings account where I get 4.15% every month year. Again, with no fees or interest. I can see that hitting their bottom line.
I’ll play the world’s smallest violin for them. I only hope if GS does offload the program to someone else the terms don’t get worse. Because it has only been upside for me since it launched.
EDIT: Clarified the interest is 4.15% a year, not a month.
You can still make money on a payment card off the interchange fees. Unless this if a different story than the one that went around this summer GS isn’t actually losing money on the card, profits aren’t just growing at the rate they want. Apples software makes it easy to see how much you need to pay to avoid interest and gives flexible 0% financing options. So what if they aren’t making money off of interest and late fees. Being anti consumer isn’t the only way to make money in finance.
The headline isn't an accurate quote. 9to5Mac, quoting the Wall Street Journal:
When Goldman Sachs and Apple launched their joint savings account in April, Goldman held a town hall at its headquarters, where bank executives talked it up. One executive had a different message shortly afterward. “We should have never done this f—ing thing,” the Goldman partner told colleagues.
"Mistake" isn't actually even part of the quote. The headline also implies that this is an observation made by looking back on it, rather than a comment made at launch by someone who may not have even been involved in the project.
Sounds like someone doesn’t know how to run a bank. That’s ok though, Apple has plenty of money, a loyal customer base, and plenty of other suitors. I’m sure if Goldman is no longer interested that someone else will be.
The article doesn't actually have any data at all regarding the savings accounts. It combines losses on credit cards with a pessimistic quote from someone at the launch of the savings accounts. The credit card losses also look worse than they are. Goldman Sachs definitely seems to think they made a mistake, so I don't doubt they're losing money, but the numbers themselves are primarily paper "losses." They're setting aside a huge amount of money for theoretical future defaults on repayment. My understanding is the numbers are extra high right now precisely because they're brand new and haven't previously been provisioning for future losses. I don't know the exact numbers involved but it seems like they're recording extra losses last year and this year that would cover several years of future losses (cynically, I'm just going to assume this is some sort of strategic tax dodge).
I would guess the savings accounts just aren’t bringing in as much in deposits and there are more small accounts and higher operational costs than they planned for.
There’s been no indication at all that the savings accounts themselves are unprofitable. This article combined a journalistically negligent misquote from a single person at the internal announcement of the savings accounts with fuzzy numbers about previous provisions for future losses from the credit card. If they had any integrity, they’d just delete the whole article.
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