One of the few surprises during Apple’s earnings call last week was Tim Cook revealing a brand new deal for iPhone buyers that fits perfectly into its new focus on services. New iPhone purchasers can get 0% interest for two years on a new iPhone using an Apple Card.
Apple is no stranger to iPhone payment and upgrade programs, so this isn’t the first time for the company to give its customers in-house alternatives for purchasing an iPhone. However, there are major differences this time that you can see by looking back at their existing offerings.
First off you have the iPhone Upgrade Program, which Apple started in 2015. This is a 0% interest two year loan program that is administered through Citizen’s One bank. You can either pay off a device over two years or you can hand it in after one year and get the latest phone in exchange. The monthly cost also includes AppleCare+ at a small discount, which is a nice bonus. I signed up in 2016 and I’ve been very happy with it so far and still use it today.
While I like the iPhone Upgrade Program and it has grown little by little over the years, Apple isn’t out there pushing it that hard. There are aspects that are really marketable, such as the freedom to move between carriers with no contracts or phone payments owed to them, but the company hasn’t actively marketed it beyond the Apple faithful the way I expected a few years ago. There are also some minor downsides that may play a role. Each loan is self-contained, so if you trade in or pay off your iPhone, you are starting all over again and have to be approved for a new loan. Then there is the limiting factor of getting approved via a credit check, which is a problem for many.
Apple’s new Apple Card promotion is an interesting move that could be just the start of a new direction for the company when it comes to iPhone payments. By going this route, Apple can cut out the middleman. Well, mostly- Goldman Sachs is still involved with the card. However, this would still be administrated far more directly by Apple and they would have much more approval over who does or doesn’t get approved. But the biggest benefit to them is that they now have a new and very enticing way to promote their Apple Card beyond hard-core Apple fans. That makes this promotion a win-win for them.
As for advantages to iPhone users, the first is that you get 3% Apple Cash back on all of your iPhone payments. You can get this on the iPhone Upgrade Program, as well if set the payments up on your Apple Card, but this is a very easy way for Apple to handle it for customers. You also have the option to leave off AppleCare+ if you don’t want it or prefer to cut costs, which is not an option with the iPhone upgrade Program. If you do add it, you will get 3% Apple Case back on it, as well.
The other big difference between the two programs right now is that the iPhone Upgrade Program currently offers the option to trade in and upgrade after one year. This Apple Card promotion is currently locked in at two years. You could sell the phone, pay off the charge on the card and start over again yourself, but Apple makes this process as smooth as silk with the Upgrade Program.
I will be listening intently to next year’s iPhone announcement event, as I wouldn’t be surprised in the least if Apple starts offering more options to pay for an iPhone and easily upgrade yearly through the Apple Card. It’s a no-brainer for them, really. Now that they have a mechanism to handle customer payments directly, they can make a little more money and more importantly, have more control on how the program works and who can get in.
The aggregated data they can gather on who uses the program, how well they keep up with payments and if new Card users then begin to use it for more purchases is invaluable for the future. Making upgrades and payments easy for customers is a great way for Apple to make the most of iPhone sales as they gradually decline. This data will also help them to tailor the program to fit the largest number of people possible.
Apple offering this 2 year 0% interest deal through the Apple Card feels much more like a first step than a one-off promotion to me. The expansion of this offer to eventually take over what the iPhone Upgrade Program does right now seems inevitable, even if it takes longer than a year to happen. This would fit with Apple’s big services push and would also help them to maximize and stabilize iPhone sales as much as possible going forward.
There is a broad Apple world full of additional opportunity beyond the iPhone, as well. There was talk of a grander Apple services subscription bundle based on some of the comments from the earnings call. So far, no one at the company has ruled that out. Then there is so much more hardware out there that Apple could offer these kinds of Apple Card promotions for. I would absolutely consider doing this for an iPad Pro or Apple Watch purchase in the future and I won’t be surprised if we see such programs or promotions, even for the Mac.
As for the near future, Apple has already come out with some additional 3% Apple Cash back partnerships and promotions since the Apple Card released. Now we have this latest iPhone deal in time for the Holidays. I wonder if there will be anymore Apple Card promotions from now until Christmas to take advantage of the year’s biggest shopping season? What I do know is that the Apple Card is a powerful tool for Apple and they are already broadening its reach to take full advantage of it.