The Apple Card’s new feature tackles one of credit’s biggest problems
At its Spring Loaded event held virtually on Tuesday, the very first thing Apple announced was a new Apple Card feature called Apple Card Family. Available in the U.S. in May, Apple Card Family allows two people to co-own an Apple Card credit card, merging their credit lines while building credit together equally. Apple Card Family also lets parents share an Apple Card with their children.
This comes almost a month after the New York State Department of Financial Services (NYDFS) released a report that cleared Apple and Goldman Sachs of gender-based discrimination. That followed an investigation initiated by online complaints shared shortly after the card’s initial launch in 2019. At the time, tech entrepreneur David Heinemeier Hansson tweeted that he had received a credit limit that was 20 times higher than what his wife Jamie was offered despite her higher credit score.
In its investigation, NYDFS found that gender was not a factor influencing Apple Card eligibility. Still, spouses’ credit scores, debt, income, missed payments, how they used their credit, and other credit history elements were considered. In the end, NYDFS concluded that none of the factors identified was an “unlawful basis” for a credit determination.
Despite this finding, there’s still a need for more transparency regarding the current credit score system. In Apple’s press release about Apple Pay Family, Jennifer Bailey, the company’s VP of Apple Pay, acknowledged that issue saying, “we designed Apple Card Family because we saw an opportunity to reinvent how spouses, partners, and the people you trust most share credit cards and build credit together. There’s been a lack of transparency and consumer understanding in the way credit scores are calculated when there are two users of the same credit card since the primary account holder receives the benefit of building a strong credit history while the other does not.”
The path to women’s credit independence started with the Equal Credit Opportunity Act of 1974, which put an end to lenders requiring women to have male cosigners on loans. Before then, women might have also been required to make larger down payments on homes than men with similar credit profiles.
While these practices became illegal, other factors also impacted women’s ability to access credit. Income is usually a primary qualifier for creditors, and considering the income gap between women and men, it is easy to see how that would negatively impact women’s credit. According to Payscale, as of March 2021, women earned 82¢ for every dollar a man makes. That pay gap does not affect credit alone. It also impacts the ability to repay debt such as student loans, which in return negatively impacts credit.
According to the American Association of University Women, women take out roughly 14% more student loans than men. At the end of their degree program, women typically have $1,500 more in debt than their male counterparts, and it will take them two years longer to repay those loans compared to men. According to the Bureau of Labor Statistics, women are more likely to help a member of their family pay for student loans.
Women are also more likely to be a primary caregiver and earn no income. These women can be added as authorized users on their spouses’ credit cards. But since they aren’t responsible for making the payments, their history does not hold the same weight with some lenders.
THE POWER OF SHARING
Apple Card Family aims at addressing some of these challenges by allowing both the owner and co-owner of the card to build a credit history. Apple Card Family can be shared with up to five people who are part of the same Family Sharing group and are 13 years or older. Only users who are 18 or older can be co-owners and can build credit history. Monthly statements will show each other’s spending and make both owner and co-owner responsible for payments. If participants opt in, their account activity, including payment history, will be shared with credit bureaus such as Experian.
When Apple first introduced Apple Card improving users’ financial health by making interest charges clearer and allowing for easy and flexible payments was a big talking point. With Apple Card Family, developing healthy spending habits is extended to kids 13 years or older, who can be participants on the card. Parents can set overall spending limits and individual purchase limits, creating a spending safety net but allowing young adults to start managing their own spending. Thirteen is also the age a user is eligible to use Apple Pay.
There are debit cards specifically created for children that can be linked to Apple Pay, such as Greenlight, but the ability to link an Apple Card provides a higher degree of control for the parent thanks to the tighter integration with users’ iPhones. Being the mom of a 13-year-old myself, I see the appeal of teaching children about managing their own money in a more modern way than using pocket money in cash form, especially at a time when so many purchases are made online due to the pandemic.
While I found it a tad disingenuous that Apple did not admit to Apple Card’s initial shortcomings when it came to fair access to credit, I can only welcome Apple Card Family’s potential to offer a better credit opportunity to women. Considering that in 2019, as reported by the Mobile Ecosystem Forum, 51% of iPhone users were women, this also seems like a good business move for Apple and Apple Card.
This article was originally published on Fast Company