How Apple Card Works | Hacker News Reader

How Apple Card Works

techcrunch.com

63 pointsjmsflknr67 comments

What's TechCrunch's source on all of this info? Or is it just pure speculation/reasoning?

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I was talking with a friend a few days ago about how the physical Apple Card would work in reality. During that conversion, I came up with the idea that maybe the physical card contains a custom chip on it that an iPhone can communicate with via NFC. That NFC chip would be able to rewrite the card info (i.e. card number, exp. date, and CVV) at will to the physical chip on the card (the one that talks to the actual payment terminals) and that's how Apple is going to issue cards that never technically expire. Perhaps they'll do something similar with the mag stripe (their promo videos pretty clearly show that the physical card does indeed have a mag stripe)?

The chip on the card is an entire computer running a Java program every time it's activated by the terminal. What it communicates via that terminal can vary, the same way the NFC tap-to-pay terminals can vary. There's no need for it to carry a conventional card number or expiration or anything.

My reasoning operates under the assumption that the chip that communicates with the payment terminal sends a card number to the terminal at some point in time. I do not know how the protocol works in reality however.

That might be a fallback option but modern terminals do not need a card number.

Why on earth would it run java?

It is nothing like the real Java. Almost no regular data type is supported and there are severe limitations. [1]

You should view it as using a safe language instead of something like C. If Rust had been invented 20 years ago, it might have been Rust instead.

[1] https://en.wikipedia.org/wiki/Java_Card

fascinating. thanks!

The secure element on iOS devices is a Java Card (https://www.apple.com/business/site/docs/iOS_Security_Guide.... p. 47).

Basically all smart cards use Java Card. There's an ISO standard, so I'm sure it's possible to implement your card in other environments, but everyone uses Java Card.

Because these practices were set in the mid-to-late-90's when it was fashionable to Java all the things

Did Apple tell that it never expire? Maybe the card just does not contain an expiration date, but at some point it will expire and need to be replaced.

Why couldn't they have dropped the magstripe completely and forced the card to use online chip mode only and then declined all transactions unless temporarily unlocked within app? Would be a lot simpler than pairing card to phone.

Presumably because there are still a lot of transactions out there requiring a magstrip.

You are correct. Lots of places still don't take chips. Pei Wei for one.

At Lowes last month I noticed that chip is only accepted for credit transactions; debit has to be swiped. Or the other way around.

In the USA, pay at the pump transactions for fuel are still 100% mag strip as far as I've seen. The POS terminal inside can typically do chip transactions, but not the pumps.

I’ve used Apple Pay at a few Sheetz stations along I-95, but the vast majority of stations are still swipe-only.

Whereas here in Australia you'd be hard pressed to find a place where you can use magstrip. It's tap to pay by default.

I think this is one of the few cases where technology upgrades are easier in Australia. Since there are only 53 banks in Australia, and 14 are owned by the government, it's a lot less complex than other countries.

In the United States there are almost 5,000 commercial banks plus another 5,500 credit unions.

I agree, however on the flipside the Apple pay rollout has been a nightmare. Our big 4 banks have been fighting over the implementation of the platform which has led to some our biggest banks simply not implementing it.

This is where the Apple card will put additional pressure on our institutions to be more compliant. Given that if my current bank won't allow it, I can easily sign up with Apple card and be on my way

Most people who buy iPhones probably already have at least one credit card, and this would be a good way for people to start demanding that merchants buy new readers.

This is a nice card for beginners to credit cards but I don't anticipate a lot of uptake by consumers familiar with the Uber Barclays or Chase 2% cards.

Can you elaborate? I’m not familiar with these. What are the pros/cons?

As for the Apple Card, I’ve been fairly dismissive of most of Apple’s recent products, but this is the most interested I’ve been in an Apple product since the iPhone. It feels like a similar situation: a “device” that seems simpler to use than existing offerings leveraged off of a partnership with a company that has nothing to lose by playing along with Apple’s game. It might not be the best card offering in terms of features, but it seems like a solid choice for the masses.

Uber has a fairly solid 4% cashback on restraunts, plus some high percentages on hotels and online shopping.

Apple is acting as though their rewards is the most generous reward system ever, period. In reality, it is not even close. For instance, you can trivially get 2% cashback on all purchases (regardless of whether you're using Apple Pay or not) without annual fees:

- Citi Double Cash: unlimited 2% back on everything; regardless of payment method; no annual fee

- Fidelity Rewards: unlimited 2% back on everything; regardless of payment method; no annual fee

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2% is the minimum you should earn on any credit card purchase. There are a bunch of generous rewards cards that offer special cashback rates on certain categories. For instance, the US Bank Cash+ card [0] lets you pick two categories to get 5% cashback on, albeit you're limited to $2,000 in spending per quarter. After that $2,000, you only accrue 1% back. One of the categories is 'Electronics Stores', which includes Apple. In other words, you can get 5% back on Apple purchases (on up to $2,000/quarter in purchases) while the Apple Card offers unlimited 3% back on Apple purchases. There is no annual fee for this card.

The Uber Visa card [1] gets you 4% back on dining and 3% back on hotels/flights with no annual fee.

The Chase Freedom and Discover it cards both have rotating 5% categories (subject to a $1,500 per quarter maximum spend) without annual fees. Meaning, you get 5% back on specific categories on each card which change every quarter. In 2018, the Chase Freedom card had gas stations, internet/cable/phone, Google/Apple Pay, grocery stores, PayPal, gas stations, Lyft, Walgreens, department stores, and wholesale clubs as some of their rotating categories [2]. Also in 2018, Discover had gas stations, wholesale clubs, grocery stores, restaurants, and Amazon as their categories [3].

Admittedly, I believe most of the banks named above charge the "normal" fees that Apple has stated they will not be charging (i.e. penalty APR rates, late fees, etc.). But in reality, responsible users of credit cards were never going to pay those kinds of fees anyway.

[0]: https://cashplus.usbank.com/merchants/index

[1]: https://www.uber.com/c/uber-credit-card/

[2]: https://thetravelsisters.com/chase-freedom-categories-2018-c...

[3]: https://awardwallet.com/blog/discover-5-categories-calendar-...

Apple is acting as though their rewards is the most generous reward system ever, period

Is it? I don't think Apple is pretending to be the most generous. I think it's trying to be the easiest/most friendly.

There are a lot of ways the Apple card is better than those you list, especially when it comes to fees. But your post is too long for me to bother going through it.

I picked your Uber example randomly.

4% back is great on dining. But it's only on dining. 3% on travel matches Apple. The rest of Uber is 2%, except for some exclusions, which is less than Apple.

Buy music and videos online? With Uber you're capped at $50 cashback per year. And you only get that after you spend $5,000 within 12 months. And then the clock resets.

Too many games. Apple's whole point is to simplify.

Personally, I don't even like the whole cashback thing, but I accept that other people do. I'd rather they just lower my interest rate instead.

Uber's rate is 17.24-25.99%. We'll have to see what Apple comes up with.

If one is borrowing money at credit card level interest rates, the last thing they should be worry about is rewards, and the first thing is figuring out how to fix their cash flow so that they’re not paying credit card level interest rates.

If you're shooting for rewards, there's no point in talking about interest/fees. Interest/fees negates the rewards rate of any credit card many times over. The right way to use a credit card is to put whatever spending you can afford to pay off immediately on the card, pay the card balance, and pocket the 2-5% in rewards. All while not paying anything in fees/interest.

> 3% on travel matches Apple

I'd like to point out that you shouldn't compare 3% on travel/dining spending to 3% on Apple spending. They're not comparable in that way.

> Buy music and videos online? With Uber you're capped at $50 cashback per year. And you only get that after you spend $5,000 within 12 months. And then the clock resets.

You're talking about the $50 statement credit that gets applied only if you spend at least $5,000 in a single year. This credit is in addition to the normal cashback rate (which is 2%). The normal cashback rate on the Uber card is uncapped. 2% cashback is not worth talking about in the age of the Citi Double Cash/Fidelity Rewards card.

> Too many games. Apple's whole point is to simplify.

Credit card rewards systems are convoluted. But you can get modest rewards with minimal effort. I don't think the Apple Card has any value here. If the goal is to actually simplify, just get a 2% card with no annual fee and be completely done with the 1/2/3% cashback tiers.

> Uber's rate is 17.24-25.99%. We'll have to see what Apple comes up with.

The range they've disclosed is 13.24-24.24%. Which isn't really that low in comparison nor overall.

> Apple is acting as though their rewards is the most generous reward system ever, period. In reality, it is not even close.

I'm looking forward to hearing about how Apple invented rewards in a few years.

Sort of, Apple’s detractors will as usual say something like “Apple and their fans think they invented rewards!” with everyone else looking at them strangely.

> both have rotating 5% categories (subject to a $1,500 per quarter maximum spend) without annual fees

So, $75 of rewards per quarter? That’s not even worth the trouble it would take to apply.

You're optimizing the spending that you were going to do anyway. For instance, I have to pay the utility bill no matter what; I spend about $3k/year in utilities. I could put that spending on my 2% card and get back $60/year in rewards. Or if I take the time to do my research I could find out that by putting it on my US Bank Cash+ card, I can get 5% back which comes out to be $150 in rewards/year (a gain of $90/year). The only additional work was the 5 minutes to apply for the card, and the 5 minutes/month it takes to log in to the website, pay the card, and log out. A $90 gain / 60 minutes of work per year = $90/hour in "reward income."

In practice, you don't use most of the 5% categories. Whenever a quarter with useless categories comes around, just stick the card into a drawer and check back in 3 months.

You're correct that the ongoing rewards rates are typically fairly anemic overall. The real rewards in credit cards comes from the sign up bonuses. It's pretty easy to get $500-1000 of value by signing up for a credit card and spending $3-5k in the first 3 months of card membership.

Cash back reduces from 5% to 1% after $1500 is spent that quarter

do those have privacy features, and do they promise not to share your purchasing history? (not intended as rhetorical question, if you are a credit card nerd maybe you know of cards that can compete with Apple in this area.) i care about that far more than rewards.

The privacy features are interesting. Unless 100% of my transactions go through the Apple Card or cash though, I am not sure it actually means anything.

Their privacy assertions are very ambiguous. Apple can’t see your data, but Goldman Sachs can. Apple says GS won’t use it for marketing, but there are many non-marketing commercial uses for the data.

After Google announced it is buying most consumer's credit card transaction data, privacy promises are something we should all be looking for.

>Google has been able to track your location using Google Maps for a long time. Since 2014, it has used that information to provide advertisers with information on how often people visit their stores. But store visits aren’t purchases, so, as Google said in a blog post on its new service for marketers, it has partnered with “third parties” that give them access to 70 percent of all credit and debit card purchases.

https://www.technologyreview.com/s/607938/google-now-tracks-...

this is true but I am okay with GS having my data and using it for their own nefarious schemes; I am bothered by the idea that it may be shared promiscuously with dozens of data brokers and companies in a personally identifiable form.

That’s just it—the way they describe it, they can use it for nefarious schemes, except marketing.

A bit off topic, and I may be (most likely) wrong... but isn't Apple Card a good way for apple to dodge tax in some countries? Like if I'm in Australia and I pay using Apple Card then pay my apple bill, apple gets 100% of the bill paid with no sale so the money is in the country of their choosing paying the minimal amount of tax.

> Using Apple Card on Android is pointless... you could continue using your physical card... but without the majority of the cash back or security benefits why would you?

I’m mainly interested in the card for the privacy benefits, but would love to get rid of my iPhone (and wouldn’t want to use a card dependent on carrying one).

Does anyone familiar enough with transactions know if the physical card would still be generating virtual numbers for each transaction if you’re not carrying an iPhone?

I think the no-fees is partly a reflection of the reality of what it costs a financier when you are late with a payment and partly a means of standing out in a field where everyone else is lining up to kick you when you are down. I use the “Don’t Fuck With Paste” browser extension on CapitalOne’s sites more then anyone else’s - why don’t they want me to cut and paste into their web forms? Because the small percentage of typeos that occur due to manual data entry translate into millions in fee income - and of course it’s your fault you got fined because it’s your mistake.

Probably the worst industry for this is car rentals - I have often wished Amazon or some disruptive entity would get into car rentals. The entire industry exists to just to shake you down when your at your most vulnerable - far from home, unfamiliar territory, limited options. Is there any reason why they can’t accept an alternate credit card from the one that secured a reservation? No. Is there any reason the slightest change to a reservation requires the previous reservation to be completely destroyed and renogiated at a new price? No. Is there any reason that cash can not be accepted? No. I live in a state that forces the rental car companies to accept cash and they do just fine.

> Is there any reason why they can’t accept an alternate credit card from the one that secured a reservation?

I did just that 3 weeks ago. Someone made a reservation for me, I used a different card to pick up the car.

I'll be honest, I want this because it's a cool looking metal card. I already use Apple Pay for the majority of my regular in-person spending, and don't carry balances on (normal) credit cards so, it would just be a bump in my available credit and a cool widget fitting right in with my minimalist wallet. It would be a perfect white balance for my black Tesla key card.

I can't lie, I was thinking of switching to the Apple card when it's released. Unfortunately, it's a mastercard :( so no costco gas or shopping and I only carry one credit card in my wallet..

Why not just use the digital form via the Wallet app?

What if he/she does not have an Apple phone?

I don't get the "no late fees" feature. I suppose they'll still make plenty of money with the interest charges, and they'll probably freeze the card for new charges at some point.

The post title gave me the slightest pang of hope that HyperCard was revived, until I remembered the credit card. This is cool too, but not as much as I hoped.

I'm still floored when I read those interest rates. You guys got a Visa Debit? It's a visa, that uses the money you have... Clever isn't it?

When will people understand that buying something now without the money is not freedom? It's not, it's shackles.

I think conventional wisdom is that you should pay your card off each month and never pay interest. That way you benefit from the cash back or other rewards program and have better protection against fraudulent transactions (it’s the issuing banks problem, not yours). Now, in practice, many people don’t do this and the credit card companies bank off of that

For all your moralizing, you're suggesting people forgo the sizeable benefits of using a credit card for day-to-day purchases because some people are foolish enough to use it as a long-term loan?

> When will people understand that buying something now without the money is not freedom

I would imagine the vast majority of people worldwide who have a mortgage are happy with the end-result of that leverage.

No they're not. No one is happy with a mortgage. The very simple fact that mortages exist is the reason why housing prices have multiplied over the years.

I'm happy with my mortgage(s); they allow me control of real estate it would've otherwise would've taken me 10-30 years to obtain.

Cheap capital can of course create asset bubbles, but nevertheless, debt is one of the most useful tools you can use for wealth creation, innovation, and economic growth.

I was pretty happy with a mortgage payment that didn't go up, while rent tripled around me.

You live in a place that is so detached from reality in the rest of the world. Don't forget that. And consider how much you're paying for housing compared your parent ever did, and if you're still happy, maybe you should start wondering what kind of world you'll leave to your kids... Sorry but not sorry.

Yes the price of housing is out of control and it is in much of the western world at the moment. But mortgages existed long before this happened, there is no causation there. As for rent, even under normal conditions rent will be subject to inflation and a mortgage won't, plus there's that juicy zero rent future to look forward to.

You realize that it’s zero interest if you pay it on time, every time, right? Even with the money, I use cards to get airline points and fly around. Might as well get something if you’re spending it anyway.m and paying it off.m monthly to zero.

When will people understand that buying something now without the money is not freedom?

I guess someone's never had his car break down far from home.

Debit cards have no fraud protections.

I'm not sure that's true, but credit cards generally have much stronger protections, and your main bank account isn't going to get drained in the interim.

As you can see from the other reply to your comment, lots of people have been tricked into using Credit Cards by things like "Cash Back".

i.e. "I'm going to save money because I get 2% cash back" ! Type of reasoning. Marketing it very powerful, lots of people have been tricked by it.

I don't remember the last time I carried a balance on a credit card, or paid any fee at all for the short-term credit I get on a card. I do remember a 10 night stay in the Maldives I got for free from using credit card points effectively though.

Help me understand how I've been tricked, please?

The fact you got the trip for free perfectly illustrates that for every one of you, there are thousands who get taken advantage of.

Remember, even after giving you the trip, the CC company still turns an astronomical profit.

So, is your advice to people who can manage credit cards to forgo them?

Perhaps the world would be better off without easy money at usurious interest, but given that we're in the world we're in, the rational thing seems to be to take advantage of the rewards programs available, because I'm paying for them either way.

> So, is your advice to people who can manage credit cards to forgo them?

I said "lots of people have been tricked".

The fact it doesn't apply to you, personally is why I didn't say everyone.

Great, you're an exception to the rule. Buy yourself and beer and pat yourself on the back for not being with the majority.

In the mean time, realize you are not normal, and for most people a scheme like "cash back" doesn't actually save them money. - and we know this is true because those people paid for your trip AND they pay for the healthy profit of the CC companies.

Sure but either way you are going to use credit card anyway, might as well take all the advantage you can get.

There’s a lot of people who can’t manage their money.

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