About Apple Pay Transfers

Apple recently announced that person-to-person transfers will be introduced in iOS 11 in fall 2017. Apple is partnering with the “well-known” Green Dot to make this feature work. In the future, you’ll be able to send money to someone in iMessage and pay them directly through Apple Pay.

The basic idea is that a Green Dot Prepaid Card will appear inside Apple Pay. Money received by the recipient will be stored on this Prepaid Card. The Prepaid Card is linked to a bank account, so you can transfer the money back to your bank at any time, or use it for purchases directly through Apple Pay. Presumably, you may also be able to use this card to send money to others as well. My guess is that if the prepaid balance is not enough when making a purchase or transfer, it will automatically pull funds from the linked bank account.

You can fund transfers using a credit card or a bank debit card added to Apple Pay. Currently, the fee for credit cards is 3%, while debit cards have no fee. (H.T Apple Insider)

How to Use It

Best Credit Cards

If you want to use a regular credit card to send money to someone, it is probably not worth it. Most credit cards only earn up to 2% cash back, so compared with the 3% fee, you still come out behind. Of course, if you are trying to meet a minimum spending requirement, losing 1% may still be acceptable. However, Green Dot is a veteran issuer of Prepaid Cards, so it may impose some controls on unusual large transfers. We probably won’t know for sure until the feature officially launches.

Since these transfers are processed through Apple Pay, I suspect some credit cards that offer extra rewards on Apple Pay purchases may also earn bonus rewards here. For example:

Cash Wise only earns 1.8% cash back, which does not offset the 3% fee. The 3x points from Altitude Reserve could be quite valuable, because those points can be redeemed at 1:1.5 for airfare, hotel bookings, and car rentals, making that effectively 4.5% back. After subtracting the 3% Apple Pay P2P fee, you would still come out ahead by 1.5%. I would guess normal everyday transfers should be fine. If you want to use this to meet minimum spending requirements or to profit directly, it will depend on how much US Bank, Apple, and Green Dot tolerate large transfers.

Best Debit Cards

Since debit cards have no fee, there are many more possible uses. The two most typical ones are below:

  • PayPal Business Debit Card: it can be funded through PayPal Cash, making it a good way to cash out without loss. If you also have PayPal’s Prepaid Card, linking them together might even earn 3x points.
  • Meeting debit card transaction count requirements: making transfers from time to time to satisfy these requirements is pretty useful, and with no fee there is no opportunity cost.