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How Apple Card Family Equalises The Credit Building Process
Smart Money

How Apple Card Family Equalises The Credit Building Process

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Okay, so Apple Card is still not available here in Australia. Despite Apple launching the card in the US almost two years ago, we are yet to hear anything solid regarding when it will make its way to Australian shores.

With that being said, finding out what’s new in the world of Apple Card – as announced in Apple’s recent Spring Loaded event – may still be of interest to Apple aficionados based here in Aus. And, of course, there’s the credit card tech angle too, which can’t help but pique our interest. We love a bit of credit card news.

Which is why we thought we’d take a closer look at those Apple Card updates in this post. Moving on from the basics – what Apple Card is and what it does – we’ll then dive into what new tech Apple Card will offer when Apple officially launches its updates later in May.

Revolving around the introduction of Apple Card Family, these updates could change the way people build credit, allowing those without a credit history to ‘piggyback’ those who do. Apple has also touted the card’s account sharing ability as a way to teach kids about money.

Want to know more? Let’s get into it.

What is Apple Card?

With Apple Card, Apple claims to have “completely reinvented the credit card”. So, how does it work? 
Built into the Apple Wallet app, Apple Card is the first credit card designed for iPhone. So, while it does come with a titanium companion card, Apple Card is primarily digital, intended to be used by cardholders as they pay with their device wherever Apple Pay is accepted.

Operating within this digital sphere does have its advantages. Let’s say you live in the US, you have an iPhone and are eligible for Apple Card. To apply, all you need to do is open the Wallet app and tap the add+ button. From there, simply select Apple Card and complete the application.

After you accept Apple Card’s offer of a tailored credit limit and purchase rate, Apple Card is added to your Wallet app and you can use it instantly.

Moving on from its streamlined application process, Apple Card offers the same sense of simplicity  in day-to-day use, while utilising all the intuitive features you’d expect from iPhone. Here are the highlights.

Spend Tracking & Budgeting

With its spending tracker, your Wallet app will automatically categorise all your spending, showing you where each transaction took place using integration with Apple Maps.

While this might sound a bit stalkerish, it could help you pinpoint where certain transactions were made when you come across those you don’t recognise. As for its categorisation of your spending, this could go a long way to helping you with your budgeting efforts.

Making Informed Payment Decisions

When it comes time to pay off that spending, Apple Card offers a visual tool that allows you to see how much interest you will pay depending on how much of your balance you plan to pay off. This is a real time estimate, letting you adjust your potential payment amount to determine how much interest you will pay as a result of that particular payment.

Which brings us to costs. Yes, Apple Card charges interest – it’s a credit card, after all – with the rate ranging from 10.99% p.a. to 21.99% p.a. based on cardholder creditworthiness. As for fees, there are none. No annual fees, no foreign transaction fees, and no late fees (although cardholders will pay a penalty interest rate on their balance after making a late or missed payment).

Earning Rewards

With no annual fee, you’d expect no rewards, right? While that tends to be the case here in Australia, you can find plenty of rewards cards with no annual fee over in the US. Apple Card is one of them.

Using Apple Card, cardholders can earn unlimited Daily Cash on their card spending at a tiered rate of up to 3%. As the name suggests, these cashback rewards are provided to the cardholder on a daily basis. Cashback can then be used straight away to make purchases using Apple Pay, to put toward cardholders’ Apple Card balance, or to send to friends and family in Messages.

Security

Anything else worth mentioning? Security. Using Apple Card via their device, the cardholder authorises payments using Face ID or Touch ID. As for the physical card, this is numberless, with no CVV (this info can be found in Wallet, when required).

How does Apple Card compare?

Apple itself says: “Apple Card. It’s everything a credit card should be.” Having spent quite a bit of time reviewing credit cards, we would be hard-pushed to disagree. Within the Australian market, there’s not much that could compare.

While there are plenty of no annual fee credit cards to choose from, most are pretty basic. In terms of rewards earning cards with no annual fee, here’s how they stack up. 

 

As for extras, they tend to be scaled back on no annual fee cards – although a notable standout is the Citi Simplicity Credit Card, which provides access to a range of complimentary insurance covers, and a free bottle of wine when dining at participating restaurants within the Citibank Dining program.

And security? Any credit card compatible with Apple Pay can take advantage of the secure features offered within that tech, including the authorisation of purchases using Face ID and Touch ID. Credit cards in Australia also offer fraud monitoring as standard, as well as zero liability.

Want to make informed payment decisions while tracking your spend? You can access external tools and calculators to accomplish the same ends as Apple Card features. The main difference is, Apple Card wraps it all up in a neat little package, installed on your iPhone, which is rarely out of arm’s reach.

What’s new with Apple Card?

Time to get into those updates. On April 20, Apple announced a number of new updates and upgrades during its Spring Loaded event. Apple Card Family was one of them.

According to Apple, Apple Card Family is “an innovative new way for people to share their Apple Card, track purchases, manage spending, and build credit together with their Family Sharing group”. 

What does that mean exactly? With Apple Card Family – due to launch in May – two people will be able to co-own an Apple Card. Doing this will allow them to share and merge their credit lines, while building credit together equally.

Aside from that, users can choose to share Apple Card within their Family Sharing group. For parents, that could mean sharing Apple Card with children who are 13 or older, putting optional spending limits in place.

Just like Apple Card’s other streamlining features, Apple Card Family is designed to simplify the process of dealing with everyday finances. Accountholders can track family spending, to then pay it all off, all on one bill on their iPhone.

Time for a bit more detail.

Sharing Accounts

Apple Card can be shared by two ‘co-owners’. In non-Apple speak, co-owners would probably be called joint applicants. For current Apple Card users, this would allow them to add a co-owner to their account. Obviously, that co-owner must be eligible to apply, and must be aged 18 or over.

As another option, two Apple Card users may choose to merge their accounts. When merging two Apple Card accounts, Apple says it merges the two users’ credit limits. So, if one cardholder has a credit limit of $10,000 and the other has a credit limit of $5,000, their combined limit would be $15,000.

In terms of interest, Apple assigns the lower of the two users’ purchase rates to the merged account. Again, this could work out well for a co-owner whose credit is not that great, allowing them to benefit from a lower rate, regardless of their own credit score.

Transparency is another key factor. With one shared bill, co-owners can obviously see what the other has been spending. But, at the end of the month, there is the added advantage of having only one repayment to keep on top of. They also share the responsibility of making payments.

Building Credit: Co-Owners

Perhaps the most interesting aspect of this concept of sharing, however, is that it allows co-owners to build credit history together. So, even if one co-owner is new to credit and would find it hard to get approved for a credit card on their own, they can use the opportunity of being a co-owner to build their credit score over time.

It’s worth noting that while this is generally how a joint credit card account works, those types of accounts are few and far between on both the US and Australian market. Instead, card providers tend to allow additional cardholders to be added to the account. But with this, only the primary cardholder’s credit score benefits from responsible credit card use.

During the Spring Loaded event, Apple CEO Tim Cook said that Apple wanted to address this imbalance with its creation of Apple Card Family.

“One of the things that became apparent to us in the beginning was a lack of fairness in the way the industry calculated credit scores,” he said. “When there were two holders of credit cards, one got the benefit of building a good credit history, and the other did not.” 

“We will reinvent the way this works soon. But today, we’re happy to announce that Apple Card will allow spouses and partners to share and merge their credit line, have equal rights under the account, and build credit equally.” 

“This solution helps deliver financial equity. And it’s a game changer.”

Building Credit: Participants

Whether you have a co-owner on your account or not, you have the option of adding ‘participants’ as well. Again, in non-Apple speak, these are essentially additional cardholders.

Apple states Apple Card users can add up to five people to their Apple Card account by sharing Apple Card with them in Wallet. All users must be part of the same Family Sharing group in order to be invited to Apple Card Family, and be 13 years of age or older.

Participants aged 18 and over can opt in to use Apple Card to build credit in the same way as co-owners. It’s worth noting that it seems authorised users on standard credit cards in the US can do this already, but within the Australian market, that’s not an option.

As for kids under 18, they can choose to release their Apple Card spending to credit reporting agencies when they come of age. This allows them to start building their credit long before they hit adulthood, putting them a step ahead when they do choose to apply for credit.

Learning Money Management

At this point, it’s worth pointing out that sharing credit is really only a good idea when all parties understand the concept of using it responsibly. If one user goes wild with their spending and cannot pay off the balance, that’s less than ideal. Similarly, you wouldn’t want to be building credit with someone who keeps forgetting to make repayments.

Which may be why Apple is also promoting Apple Card Family as a way to teach kids “smart and safe financial habits”. And by giving accountholders the option of putting spending limits in place for each participant, Apple Card aims to help teach them “how to spend independently and responsibly”. 

It goes without saying that parents need to put in the groundwork before handing their offspring a credit card. And then back that up with regular discussions as their kids get used to spending and paying back what they owe. 

Apple may be many things, but it’s not magic. Apple Card is a tool for learning. The guidance for using that tool needs to be provided by parents. 

Daily Cash

And rewards? Apple Card Family allows both co-owners and participants to reap the rewards of their spending. Unlike traditional rewards cards, where points earned by the primary and additional cardholders automatically go to the primary cardholder, Apple Card provides each user with Daily Cash for their Apple Card purchases.

What’s the verdict?

In terms of credit building between partners and spouses, Apple Card Family certainly has a lot to offer. Equalising that ability to earn credit, while allowing co-owners with a lower credit score to benefit from lower rates is sure to be appreciated by users.

For those aged under 18, this concept of being able to build credit is pretty darned amazing. Imagine stepping into adulthood with a good credit score, instead of no credit at all. This could allow you to get a car loan with a lower rate, or to access a basic credit card of your own.

And, as long as your parents put in the work to teach you about responsible use of credit, you would again have a head start on your peers. Instead of wandering into the world of credit cards and loans not really knowing how it all works, you would already have knowledge of how interest works, how to avoid overspending, and how important it is to pay down your balance each month. 

With that being said, the more sceptical of Apple’s critics may condemn this concept of sharing credit with minors as the company’s way of drawing in the next generation, encouraging their use of iPhones, providing them access to credit while earning enticing rewards.

This could certainly be a consideration. Here in Australia, CommBank has copped a lot of heat over the past few years over its Dollarmites program. Where the program is packaged as a way to teach kids about financial literacy, opponents say it’s simply a marketing ploy to encourage schoolkids to sign up for CommBank accounts. 

Just last week, the Queensland government announced the end of school banking programs – like Dollarmites – after a two-year Australian Securities & Investments Commission (ASIC) review found programs to have limited value, and that children were being exposed to “sophisticated advertising and marketing tactics”.  

Alternatives to Apple Card

As we know, Apple Card is not yet an option for Aussies. So, what are the alternatives? In terms of rewards earning cards with no annual fee, we have already listed those above. They can be a pretty good option, especially for cardholders whose card spend is on the smaller side.

Want to earn cashback? If the idea of simplifying rewards tickles you, you can ditch complex rewards programs with a cashback credit card. While all cashback credit cards in Australia come with an annual fee, it could be an option worth looking into. 

What about the aspect of using a digital wallet over a credit card? If you like the idea of leaving your wallet at home and using your device to pay, while making the most of biometric authentication, this post on digital wallets should you tell you everything you need to know.

Lastly, using credit cards to teach kids about money. Yes, Apple Card makes this easier, but you can still teach your kids to be responsible with money without the Apple’s help. Starting with debit cards and moving on to credit when they’re ready, this post lays out the steps you can take to lay the groundwork for your kids, so they know where they stand with credit when they turn 18.

As for all the other stuff Apple Card offers… you’ll just have to wait for it to be launched here in Aus.

Founder - Roland B Bleyer

Roland Bleyer

Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications. Some popular offers on our site right now include the ANZ Low Rate. This special offer has no annual fee first year, a low purchase rate and long 0% balance transfer. Have a look also at the huge 0% for 30 months balance transfer from Citi with no balance transfer fees.

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