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Apple's Credit Card: What Small Businesses Need to Know

image for Image credit: Apple
Image credit: Apple

The Apple Card is a rewards-based credit card that gives consumers cash back on various categories of purchases. Because Apple is pushing the card as part of its ecosystem, users reap more rewards when they buy Apple products and use Apple Pay on their iPhones to pay for purchases. But you still get a 1% reward if you purchase anything else – even from vendors that do not accept Apple Pay – with the new titanium credit card, an unsurprisingly sleek and stylish item with your name etched into the surface but devoid of information like your credit card or CVV number, expiration date or signature.

Observers note some respectable and unique, if not revolutionary, touches to the Apple Card, such as machine learning and geolocation tracking of your spending. 

In a helpful move for consumers, Apple has dispensed with late fees, annual fees, cash-advance fees, international fees, over-limit fees, financing fees and many more pesky fee structures that other cards charge. It shows you exactly what and where you spent your money and automatically breaks down your spending into color-coded categories and awards you cash back on a daily basis to spend immediately.

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Image credit: Apple

The entire system is geared toward giving customers more control over how much they spend and get back, combined with the flexibility of using the iPhone for purchases and your Apple Card at places that do not accept Apple Pay. In the U.S., an estimated 70% of merchants will support Apple Pay by the end of 2019, compared with about 80% in Canada and 99% in Australia. That's despite the fact that, as PYMNTS reports, fewer than one-third of iPhone users have used Apple Pay once or more.

These can all be exciting features for many consumers, but what about for small businesses? Apple's presentation gave no clue from the merchant angle. While this offering is aimed squarely at consumers, small businesses may have good reasons for at least keeping an eye on the Apple Card as it enters the marketplace this summer and for the future, analysts say. Right now, the consensus is that it's a good solid offering, but the only thing that's genuinely flashy about it at the moment is the titanium material. The Apple Card encourages merchants to install Apple Pay systems, but they can also profit from allowing the card to be used even if NFC-based contactless payments and Apple Pay are not yet available. That may attract a more affluent Apple customer base.

"In terms of small businesses accepting the card, it is going to be run through Goldman Sachs and the Mastercard network, so in terms of a company looking into whether or not to accept it, the real question is whether they want to integrate the whole Apple Pay system," said Chris Kuiper, equity analyst at CFRA. "That's just going to come down to how much convenience they want for their customers and if they think that's going to open up a whole new swath of clientele or customers that they wouldn't have before – like, would someone pop into one store over another because they accept Apple Pay or don't?"

It may also benefit merchants in urban centers where people are already using their phones for other things, like mapped directions and finding places where to get a quick meal or needed item. [Interested in alternative small business loans? Check out our best picks and reviews.]

Alongside the opportunity to rope in some additional Apple Pay customers is the no-fee structure. It may be helpful that there's no foreign transaction fees for habitual travelers or for folks who order products internationally, though other cards offer that benefit too.

According to Kuiper, "it's not a bad card. It's got cash back. It's got 1% on everything – 2% if you use Apple Pay, which is becoming a bigger thing, and 3% on Apple products. But for all the other benefits, other cards already offer them, or you can get specialized cards for those things."

Rivka Gewirtz Little, research director for global payment strategies at IDC, says that Apple needs to "do something to make the Apple Card more relevant" for small companies because, despite "some nice and usable elements, it is a consumer product. This does not appear to be a business or corporate offering."

Nonetheless, Little thinks there are some attractive management and visibility features that would benefit very small companies and solopreneurs who don't mind using personal cards for business expenses.

Image credit: Apple

For example, certain Apple Card features may benefit business manageability after credit – reports of where and how money was spent – that's easy to access through the app. Built-in fraud protection and instant sign-up and deployment may also throw the Apple Card into the plus column for very small operations, since it cuts back the waiting time generally needed to get a credit card up and running.

But there are limits to those advantages. "There are some nice features in terms of manageability and visibility of spending, so if you're really a small company, it could help you," said Little. "But if you have more than a few people, then you want to have a view of what everyone is spending on your company card, and at that point you're going to need a procurement card and some sort of management app."

Lisa D. Ellis, partner at MoffettNathanson, also cites intriguing differentiators of the Apple Card compared to other co-brand credit cards, like the Amazon Card, PayPal Card and Nordstrom Card.

"The primary differentiator of Apple Card is that Apple is launching a set of 'financial health' tools tied to the card, analogous to the 'physical health' tools Apple has tied to Apple Watch, like monitoring your heart rate or tracking steps," Ellis said. "The financial health tools will enable the cardholder to better track expenses [and] manage credit. We haven't seen exactly what they will look like yet, and whether they are really a game-changer or whether they are pretty run-of-the-mill, but these financial health tools are really what is differentiated about the Apple Card."

If Apple translated that concept to small business owners, it would be beneficial in helping them separate personal and business expenses, for example.

Nonetheless, "as a co-brand credit card, it's a pretty normal and boring one – there are hundreds of co-brand credit cards (nearly every major retailer has one), and the rewards and other benefits of the Apple Card are pretty paltry compared to most major ones," Ellis said.

Some observers take a distinctly optimistic view of the overall Apple Card zeitgeist because accepting the Apple Card will be a straightforward process for small companies, especially those already familiar with Apple Pay.

"For small businesses and retailers that operate online and already accept Apple Pay, this is a huge benefit, as consumers will be anxious to use the card and begin shopping online at participating stores," said Bart Mroz, CEO of SUMO Heavy, a consulting firm specializing in digital commerce strategy, design and development. For businesses that do not yet support Apple Pay, having the titanium card linked to Mastercard will only encourage its use, widening the potential for additional customers and profits.

Mroz believes there will be processing fees associated with accepting Apple Card, but that they probably won't be as high as for other credit cards, since Apple currently charges a lower transaction fee for Apple Pay purchases than traditional credit card purchases.

Whatever judgments small companies may have about the Apple Card, they can be sure that certain basic hallmarks will benefit them: simplicity, privacy and instant reward. Beyond that is the ability to offer the card as a convenient choice to their customers, which can in turn draw in new clients interested in using the card – and eventually even sign up for Apple Pay, if they don't already have it.

Jackie Dove

Jackie Dove is an obsessive, insomniac freelance tech writer and editor in northern California. A wildlife advocate, cat fan, photo app fanatic, and VR/AR/3D aficionado, her specialties include cross-platform hardware and software, art, design, photography, video, and a wide range of creative and productivity apps and systems.