Big news from Apple here, for US citizens only.
What about EU? Who am I, Apple? Ask them!
In summary: Apple Card users can now choose to grow their cashback rewards using a new service called “Savings” offered in partnership with Goldman Sachs, which offers a high-yield APY of 4.15% percent — a rate that, according to them, is more than 10 times the US national average.
Apparently with no fees, no minimum deposits and no minimum balance requirements, with a maximum of 250.000$ FDIC deposit guaranteed.
Users can set up and manage their Savings directly from their Apple Card in Wallet.
The fancy look of the Apple Card
These are the legal terms linked in the Apple annoucement: https://www.goldmansachs.com/terms-and-conditions/Deposits-Account-Agreement.pdf
Ok, what now?
The name “Savings Account” can be ambiguous, in fact the 4% should be coming from underlying, debateably “low risk”, financial instruments.
These type of funds usually invest in US bonds (or low risk corporate bonds) and other forms of debt securities to be able to offer such ROI to Apple customers.
The fund will basically lend money, and when the debtor repay the debt plus the agreed interest rate, the fund transfers part of the gain to its subscribers — Apple in this case — who then redistributes the gain to its Savings customers (retaining a part of the gain?).
In case something goes wrong, the FDIC covers up to an amount of $250.000, per deposit (or per person? Can one have multiple accounts to split/nullify the risk?)
But what kind of limits one has in case of withdrawal? Apparently you have a one-week window to alert Savings of your desired withdrawal before your funds will be available and you can’t withdraw more than 20.000$ in a 7-days rolling period, but there shouldn’t be more than that.
Wait wait wait wait
Too good to be true?
“We may change the interest rate and APY at any time”
AHA! It’s just a commercial move with a high rate at the beginning that will decrease after what? 1 year? Less?
Also the max amount on this account is 250.000$ which is also the max insured amount, it makes sense, not a very big limitation for most people but still a limitation.
Anyway, a distinctive advantage of this new service, not mentioning the usability that is always a strong point of Apple, will be that the Cash Back offered by the Apple card than can be used in the Savings account.
Some European fintechs, N26, Revolut or Hype for example, may soon follow in the same model, which for those familiar with the crypto world is nothing new. Binance card anyone?
Federal Deposit Insurance Corp. Rate Cap
This is not financial advice but just an opinion.
At these rates if you don’t need those money right away (for everything that is not part of your emergency fund), you might as invest directly in MSCI World/S&P 500 or other low fee ETFs with expected ROI near to 6–8% for long term investing.
But anyway, back to the point, will the old fashioned US bank be able to compete in the medium-long term? Or will they just keep losing liquidity vs more digitalized platforms/services?
Apple did such a bold move, taking advantage of the recent SVB and Credit Suisse crashes, to take a piece of the market, strong of the partnership with Goldman.
Who will be next?
Thanks to Stefano for the exchange of opinions on LinkedIn, and having inspired this post.
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Originally published on blog.mb-consulting.dev.