5 ms·

Maybe I'm thinking about this wrong, but how inept do you have to be as a financial institution to lose money on _credit cards_?

by davely 3y ago

deadmutex 3y ago
heh, calling GS inept is very naive. But, maybe being an arm chair expert is on brand for HN.
- davely 3y ago
  I'm definitely not a financial expert, I just play one on the Internet. (I can also be a doctor, political strategist, and a scientist with expertise in all sorts of fields if you wish!) But in all seriousness -- at least in terms of this particular business unit, how are they effectively losing money on this? I've always been under the impression that banks make crazy amounts of money on the interest from credit card debt. I don't entirely understand it. But it looks like it's an industry wide phenomenon right now [1], and not just related to GS. [1] https://www.cnbc.com/2023/09/22/credit-card-losses-are-rising-at-the-fastest-pace-since-the-great-financial-crisis.html https://www.cnbc.com/2023/09/22/credit-card-losses-are-risin...
  - tushonka 3y ago
    This is one of the comments from the article, though I have no data to support this claim. Might be interesting if that's the case. >The people likely to buy and iphone and sign up for an apple card are not carrying balances and racking up interest.
    - Detrytus 3y ago
      Do people really do that? I mean use their credit card as an actual bank loan, paying off their credit cards in installments, with interests? I've been using credit cards for the past 15 years, and never paid a single cent of interests. In fact, in my Central European country it is quite common to own a credit card simply for added convenience and safety, but I do not know anyone who does not pay their debt on time. In fact banks here even offer you the "autopay" option, so at the end of the month the balance gets paid off automatically, so you can avoid any charges easily.
      - akhosravian 3y ago
        For context apple offers 0% apr financing on many of their products with the Apple Card. If one has the means to buy a new iPhone with cash, why not take the free ~40 bucks you can get by using Apple Card financing and keeping the cash in some other extremely low risk place (eg an FDIC insured high interest savings account like the one Apple Card offers)
      - deleted 3y ago
        [deleted]
      - jjeaff 3y ago
        most people intend to pay off their card every month. but people who run into financial problems or just have a tight month financially will often pay less on their card. and there are a lot of those people.
  - sockaddr 3y ago
    Probably because (1) The average apple card user is too savvy to need to pay any balance interest to them. (2) No stupid "earn points for the things you love" bullshit games. (3) apple isn't providing the card supplier any way to trick people into making mistakes and getting hit with fees. It's the ideal card for people who value their time and agency.
- deleted 3y ago
  [deleted]
enos_feedler 3y ago
you "partner" with Apple. Just kidding you are a supplier getting the squeezing of a lifetime.
NicoJuicy 3y ago
Probably they didn't anticipate the interest increases. https://www.cnbc.com/2022/09/12/goldmans-gs-apple-card-business-has-a-surprising-subprime-problem.html https://www.cnbc.com/2022/09/12/goldmans-gs-apple-card-busin... > More than a quarter of Goldman’s card loans have gone to customers with FICO scores below 660, according to company filings. That could expose the bank to higher losses if the economy experiences a downturn, as is expected by many forecasters. > But another factor is that Goldman’s biggest credit product, the Apple Card, is aimed at a broad swath of the country, including those with lower credit scores. Early in its rollout, some users were stunned to learn they had been approved for the card despite checkered credit histories. Tldr: having an iPhone doesn't mean you can afford one? :)
chiph 3y ago
They may not have been losing money, but perhaps not making as much as they had predicted/wanted. We'll likely never see the numbers, but I'd be curious how valuable the Apple Card franchise is vs. the Costco card franchise (now run by Citi).
- mixdup 3y ago
  The Costco (or any other retailer co-branded card) vs. Apple thing is interesting People run all kinds of purchases through Costco. Weekly grocery runs. Running their business, etc. People generally aren't shopping at Apple on a weekly or even monthly basis. The 3% cash back on Apple purchases just isn't as lucrative as rewards on spending a lot at Costco/Walmart/Target, and don't result in saving as much on credit card fees that the retailers get on their co-branded cards
  - chiph 3y ago
    I suspect there's a fair amount of overlap between the two populations, which is why I thought the comparison would be interesting. Both tend to attract affluent households.

Maybe I'm thinking about this wrong, but how inept do you have to be as a financial institution to lose money on _credit cards_?

by davely 3y ago

Maybe I'm thinking about this wrong, but how inept do you have to be as a financial institution to lose money on _credit cards_?

deadmutex 3y ago

heh, calling GS inept is very naive. But, maybe being an arm chair expert is on brand for HN.

davely 3y ago
I'm definitely not a financial expert, I just play one on the Internet. (I can also be a doctor, political strategist, and a scientist with expertise in all sorts of fields if you wish!) But in all seriousness -- at least in terms of this particular business unit, how are they effectively losing money on this? I've always been under the impression that banks make crazy amounts of money on the interest from credit card debt. I don't entirely understand it. But it looks like it's an industry wide phenomenon right now [1], and not just related to GS. [1] https://www.cnbc.com/2023/09/22/credit-card-losses-are-rising-at-the-fastest-pace-since-the-great-financial-crisis.html https://www.cnbc.com/2023/09/22/credit-card-losses-are-risin...
- tushonka 3y ago
  This is one of the comments from the article, though I have no data to support this claim. Might be interesting if that's the case. >The people likely to buy and iphone and sign up for an apple card are not carrying balances and racking up interest.
  - Detrytus 3y ago
    Do people really do that? I mean use their credit card as an actual bank loan, paying off their credit cards in installments, with interests? I've been using credit cards for the past 15 years, and never paid a single cent of interests. In fact, in my Central European country it is quite common to own a credit card simply for added convenience and safety, but I do not know anyone who does not pay their debt on time. In fact banks here even offer you the "autopay" option, so at the end of the month the balance gets paid off automatically, so you can avoid any charges easily.
    - akhosravian 3y ago
      For context apple offers 0% apr financing on many of their products with the Apple Card. If one has the means to buy a new iPhone with cash, why not take the free ~40 bucks you can get by using Apple Card financing and keeping the cash in some other extremely low risk place (eg an FDIC insured high interest savings account like the one Apple Card offers)
    - deleted 3y ago
      [deleted]
    - jjeaff 3y ago
      most people intend to pay off their card every month. but people who run into financial problems or just have a tight month financially will often pay less on their card. and there are a lot of those people.
- sockaddr 3y ago
  Probably because (1) The average apple card user is too savvy to need to pay any balance interest to them. (2) No stupid "earn points for the things you love" bullshit games. (3) apple isn't providing the card supplier any way to trick people into making mistakes and getting hit with fees. It's the ideal card for people who value their time and agency.
deleted 3y ago
[deleted]

enos_feedler 3y ago

you "partner" with Apple. Just kidding you are a supplier getting the squeezing of a lifetime.

NicoJuicy 3y ago

Probably they didn't anticipate the interest increases. https://www.cnbc.com/2022/09/12/goldmans-gs-apple-card-business-has-a-surprising-subprime-problem.html https://www.cnbc.com/2022/09/12/goldmans-gs-apple-card-busin... > More than a quarter of Goldman’s card loans have gone to customers with FICO scores below 660, according to company filings. That could expose the bank to higher losses if the economy experiences a downturn, as is expected by many forecasters. > But another factor is that Goldman’s biggest credit product, the Apple Card, is aimed at a broad swath of the country, including those with lower credit scores. Early in its rollout, some users were stunned to learn they had been approved for the card despite checkered credit histories. Tldr: having an iPhone doesn't mean you can afford one? :)

chiph 3y ago

They may not have been losing money, but perhaps not making as much as they had predicted/wanted. We'll likely never see the numbers, but I'd be curious how valuable the Apple Card franchise is vs. the Costco card franchise (now run by Citi).

mixdup 3y ago
The Costco (or any other retailer co-branded card) vs. Apple thing is interesting People run all kinds of purchases through Costco. Weekly grocery runs. Running their business, etc. People generally aren't shopping at Apple on a weekly or even monthly basis. The 3% cash back on Apple purchases just isn't as lucrative as rewards on spending a lot at Costco/Walmart/Target, and don't result in saving as much on credit card fees that the retailers get on their co-branded cards
- chiph 3y ago
  I suspect there's a fair amount of overlap between the two populations, which is why I thought the comparison would be interesting. Both tend to attract affluent households.