Consumers are in love with cash-back offers, and now the opportunity for a higher yield on their savings.
That rate definitely beats the pitifully low national average, which is 0.24 percent APY, according to Bankrate’s April 26 weekly survey.
The card is one of the better ones, with no annual, late or foreign transaction fees.
“Our goal is to build tools that help users lead healthier financial lives,” Jennifer Bailey, Apple’s vice president of Apple Pay and Apple Wallet, said in a statement.
Bailey went on to say that building saving into the Apple Card will enable people to “spend, send, and save.”
Ted Rossman, senior industry analyst for Bankrate and CreditCards.com, said that “Apple’s 4.15 percent APY isn’t at the very top of the table, but it’s close.”
The loyalty strategy is threefold, he points out: You need an Apple device to get an Apple Card, and you need an Apple Card to get an Apple savings account.
“There’s definitely a stickiness to keeping more dollars and more attention focused within the Apple ecosystem,” he said. “I certainly wouldn’t want anyone to overspend just to earn cash back.”
The announcement created quite a bit of buzz.
But can I drop some financial wisdom on you?
You never save when you spend. This is one of my go-to money mantras. It puts marketing ploys in perspective.
To get cash back or the so-called “free” things you get with reward credit cards, you have to do a lot of spending. How does that create wealth?
It doesn’t.
It’s a clever business model disguised as good money management. The theory is if you’re going to spend anyway, why not make some money back or earn a free airline ticket?
I’ve found, working with hundreds of consumers, that when we use credit — and I’m counting myself, too — we spend more than if we were limited to cash.
And let me stop you before you rush to comment or send an email swearing you only buy what you absolutely need on credit and are therefore beating the system.
You can believe that lie if you want, but plastic card usage — debit or credit — removes us from the pain of paying, enticing us to spend more. Even the most money-conscious consumers get caught in this credit card trap. It’s worse if you don’t pay off your charges every month. The average credit card rate is 20 percent right now.
I used to be an extreme couponer until a thief stole my wallet full of coupons. That’s when I realized I was so obsessed with getting a deal that I was purchasing multiples of certain products I didn’t need, tying up cash that could be put to better use invested.
There’s a lot of excitement about high-yield savings accounts. And that makes sense. People are eager to eke out every bit of earnings they can from parked savings.
“Higher interest rates on deposits are one of the silver linings of the Fed’s series of rate hikes,” Rossman said, referencing the Federal Reserve’s campaign to tamp down inflation, “which have made borrowing much more expensive but deposits more attractive than they’ve been in years.”
How much can you earn chasing savings rates?
DepositAccounts looked at Federal Deposit Insurance Corp. data to determine how banking fees and interest earnings changed between 2021 and 2022.
Banks paid out $78.7 billion to U.S. deposit accounts last year, or 223 percent more than the $24.3 billion paid in 2021. Percentage-wise, that’s a big gain for all depositors. Hallelujah, and about time after such low rates on our deposits.
The average interest earnings were $90.99 per deposit account in 2022, compared with $32.60 the year before.
Now let’s compare that with bank fees.
Banks collected $33.1 billion in fees in 2022, down from $34.0 billion the year before. The typical account was charged $39.35 in bank fees, down from $44.86 in 2021, a 12 percent decline, according to the DepositAccounts study.
The average account basically broke even in the second quarter of 2022, earning an average of $10.71 that quarter in interest while paying $10.63 in fees. By the fourth quarter of 2022, the accounts earned an average of $47.16 in interest and paid $8.47 in bank fees.
If you are going to park a lot of money for a long time, sure, look for a high-yield deposit account. But if money is moving in and out of your account, the amount you earn in interest isn’t going to be enormous.
Take advantage of cash-back offers and high-yield accounts, but spend just as much of your time making sure you make money moves that don’t start with spending.