Credit cards

In brief:

• Visa has offered Apple $100 million to become the new network behind the Apple Card, as Apple prepares to replace Goldman Sachs as its issuing bank.

• Mastercard, Visa, and American Express are in a heated competition to power the high-profile card, which has around $20 billion in balances and deep integration with Apple’s payment ecosystem.

• Apple is expected to choose a network before selecting a new bank, with the outcome potentially shaping the future of its expanding financial services.

Details

If you have an Apple Card, you may soon see a Visa or American Express logo where the MasterCard logo is right now. That's because a high-stakes battle is underway between the nation’s largest payment networks for control of one of the most coveted cards in consumer finance: the Apple Card.

With Goldman Sachs stepping away from consumer lending and looking to exit its role as the Apple Card issuer, a scramble has emerged among big-name financial institutions to take its place. But behind the scenes, a parallel and equally fierce competition is unfolding among payment networks—Visa, Mastercard, and American Express—each jockeying to power the card’s transactions.

According to sources quoted in a Wall Street Journal report, Visa has made a bold move by offering Apple a roughly $100 million upfront payment in a bid to wrest the Apple Card network partnership away from Mastercard, which currently operates the network for the sleek titanium card. That type of payment is typically reserved for the largest and most lucrative co-branded card deals.

A card worth fighting for

Launched in 2019, the Apple Card has become one of the biggest co-branded credit card programs in the U.S., with about $20 billion in balances. It has long been seen not just as a financial product, but as a key to Apple’s broader ambitions in consumer finance. Its integration with the iPhone Wallet app has made it a central part of the daily financial habits of millions of Apple users.

“Whoever wins the Apple Card deal gets more than just transaction volume — they get a front-row seat to Apple’s growing influence in payments,” said one person familiar with the negotiations.

Payment networks earn fees when purchases run over their “rails,” and Apple’s card sees high transaction volume. But more strategically, the card ties directly into Apple’s broader ecosystem of digital payments, personal finance features, and potential future banking tools.

Who’s competing?

• Visa, the world’s largest payment network, is aggressively bidding with an offer Apple hasn’t seen since Costco chose its network a decade ago.

• American Express is also making a play, reportedly aiming to become both the issuer and network for the Apple Card — a model it already uses for its own cards.

• Mastercard, the current network partner, is fighting to retain its role, and has explored leveraging its fintech platform Finicity to expand Apple’s capabilities, such as letting users view their bank account balances directly within Apple’s system.

Apple is expected to select a new network partner before choosing the next card-issuing bank. Leading contenders for the issuer role include JPMorgan Chase and Synchrony Financial, both of which have extensive experience managing large co-branded portfolios.

Goldman’s Exit

The reshuffling stems from Goldman Sachs’ decision to retreat from consumer lending, including the Apple Card and its broader “Marcus” initiative. Talks to hand off the Apple Card have been ongoing since at least early 2023.

A final decision by Apple is expected in the coming months. Whatever the outcome, the winner will gain more than a credit card — they’ll gain a strategic foothold in the evolving world of Apple-led consumer finance.

Credit-card debt in the U.S. hit another record after an unusually-high increase following the holidays.

Debt from credit cards reached $1.21 trillion in the quarter ending in December after growing around $45 billion from the previous quarter, the Federal Reserve Bank of New York said Thursday.

"We saw a larger-than-usual pop this holiday season," said Ted Rossman, senior industry analyst at Bankrate.

Credit card balances almost always rise from year to year, but usually balances fall in the beginning of the year since Americans are detoxing from holiday spending and use tax returns to pay down debt, Rossman said.

He said it is critical to pay down debt as quickly and cost-effectively as possible.

"My favorite payoff tip is to sign up for a 0% balance transfer card," Rossman said. "These allow your to transfer your high-cost debt and avoid interest for up to 21 months."

There’s growing evidence that Americans are struggling with their credit card debt, which has grown significantly since the COVID-19 pandemic. A new report from the Federal Reserve Bank of Philadelphia found credit-card balances in the third quarter rose to their highest levels since 2012. The report showed more consumers are making just the minimum amount each month.

During the pandemic, consumers made significant progress in paying down credit card balances. However, as inflation accelerated, many consumers used credit cards to keep their heads above water.

“Credit card performance is showing signs of consumer stress,” the report’s authors wrote. “The share of active credit card accounts making just the minimum payment hit a 12-year high. The share of revolving card balances to total card balances is continuing its rise since the end of the pandemic. The share of delinquent balances continues to worsen year over year after surpassing pre-pandemic levels in third quarter 2023.”

Mark Damsgaard, vice president of marketing at Vancis Capital, says inflation may have cooled since its peak in 2022, but its lingering effects have left many households stretched thin, particularly when it comes to essentials like groceries, utilities, and housing.

More reliant on credit

“Also, many lower- and middle-income households aren’t able to keep up with the rising costs of living, so they’re more reliant on credit,” Damsgaard told ConsumerAffairs. “And with layoffs in key industries and a potential recession, income has been unstable, so it’s harder to stay current on payments.”

Utility costs alone have emerged as a major burden for households. A December report from doxo showed the average U.S. household now spends $362 per month, marking a 3% increase from the previous year. This analysis, part of doxoINSIGHTS' U.S. Utilities Market Size and Household Spend Report for 2024, found that Americans collectively spend $451 billion a year on utilities, underscoring the growing financial burden on households across the nation.

In response to weaker credit performance, the Fed said banks are adopting more conservative lending standards. It said tighter bank underwriting is resulting in a measurable decline in new card origination commitments and higher origination credit quality with new account-holders possessing higher credit scores.

The Consumer Financial Protection Bureau has turned its attention to credit card rewards, which some consumers say are less rewarding these days.

In a policy circular, the CFPB warned that credit card lenders that water down or even cancel their rewards may be in violation of the law.

There are many different types of credit card rewards. Travel cards generally offer rewards based on miles that can be used to pay for future travel. But among the most popular rewards is cash back, with the lender giving the consumer anywhere from 1% to 5% of their purchases.

While cash-back rewards are fairly straightforward, travel rewards can be a little vague.

The CFPB said many consumers apply for cards based on the specific rewards they offer. The bureau says current law prohibits unfair, deceptive and abusive practices in administering rewards. Currently, the bureau says nearly 75% of credit cards offer some type of reward.

Putting a price on rewards

As ConsumerAffairs reported in 2023, credit card rewards are not what they used to be. At the time, hoteliers Marriott, Hilton, and Radisson points were valued at less than a penny while others like Hyatt valued theirs at 1.7 cents each. 

The Points Guy, a travel rewards website, publishes a monthly valuation of credit card travel rewards. In its December valuation, it breaks it down this way: