This holiday season will be the first for the Apple Card, the highest-profile new credit card in years. And every time a customer waves an iPhone at the register to use the new card, a retailer may feel an extra pinch on its profits.
That’s because the card, marketed by Apple and backed by Goldman Sachs Group Inc., is designated “elite,” which allows it to levy significantly higher interchange fees on each swipe or tap. Those fees aren’t paid by the consumer but by the merchant as part of the cost of accepting credit cards. A grocer can lose more than half its profit on a sale when someone pays with an Apple Card, or one of its elite competitors, rather than a normal card. Elite cards impose higher transaction fees to support generous reward programs for their customers.
Card networks tell merchants the higher costs are justified because premium cardholders also have more buying power — so they’ll spend more… The average purchase made with premium-branded Visa cards was $50 higher than those made with regular Visa credit cards. But the cards have long irked retailers. They have no choice but to pay the higher fees for elite plastic if they want to accept any of a network’s credit cards. A store can’t turn down [an elite Visa card] and still take the others. Mastercard Inc., the Apple Card’s network, has a similar arrangement.
MacDailyNews Take: What else is new? This isn’t really about Apple Card — Bloomberg Businessweek is just using Apple as a headline hook, as does virtually every media outlet — this is about retailers not wanting to pay elite card fees. If they really don’t want to pay these fees, retailers should offer incentives for customers to use debit, cash, or, God forbid, checks. (Don’t you just love being stuck in the grocery line behind that old lady writing out her paper check?)
Of course, the way retailers feel about elite cards goes a long way toward explaining why some balk at accepting Apple Card.