Fear of big write-off could be what's keeping Goldman from selling its Apple Card stake

In 2023 the banking world was buzzing about Goldman Sachs's partnership with Apple better known as the Apple Card. Launched in 2019, the no-fee Apple Card was delivering red ink to Goldman and there was talk that the firm was preparing to sell its share of the Apple Card to American Express. Besides the growing pools of red ink that it was having to deal with, Goldman was supposedly looking to reduce its exposure to consumer debt.

But here we are, 14 months later, and the Apple Card is still run by Apple and Goldman Sachs. The bank can't seem to turn around its consumer business segment which will result in the company taking a $400 million write-off this quarter. Goldman CEO David Solomon says that part of this hit comes from the sale of its GM card to Barclays, which included $2 billion in card balances.

Since 2020, Goldman Sachs has lost $6 billion pre-tax "on a big chunk of its consumer-lending businesses, including its credit cards." Part of the issue is that Goldman's charge-off rate on the Apple Card is about twice that of other credit cards in its portfolio. With $17 billion in card balances, a sale of the Apple Card by Goldman Sachs could generate a bigger loss than what the banking firm had to take with the aforementioned sale of the GM card. The thought of the possible size of this write-off could be what is keeping Goldman from exiting its partnership with Apple right now.

The Consumer Financial Protection Bureau has been investigating Goldman's credit card "account management practices," including how Goldman handles and resolves billing errors and refunds cardholders. The investigation is believed to be focused completely on the Apple Card say people knowledgeable about the situation.

The Wall Street Journal said last November that Apple reportedly gave Goldman a written proposal to exit the Apple Card deal over a 12 to 15 months period. So far there has been no word from the banking firm about dropping the Apple Card from its credit card portfolio. Besides American Express, another financial services firm named as a possible replacement for Goldman Sachs is Synchrony Financial.

The Apple Card doesn't charge an annual fee, a late fee, or a charge for going over your charging limit. Cardholders get back as much as 3% on some purchases. This Daily Cash balance can be swept into the Apple Card savings account (no minimum balance required) to earn interest. With no fees to help defray the costs of running a credit card, it seems to be obvious why the Apple Card is not making any money for Goldman Sachs.

To apply for the Apple Card, open the Wallet app on your iPhone and tap the "plus" button. From the next page tap on "Apply for Apple Card" and follow the directions. Or, tap on this link and click on the "Apply now" lozenge in the upper right corner.