As of Tuesday, Apple Card holders can now pay for their new iPhones with 24 interest-free monthly installments. Apple’s new program bundles monthly device costs into minimum Apple Card payments rendered through the iPhone’s Wallet app. The card represents an innovative approach to entice consumers who would otherwise shy away from high smartphone costs.
Additionally, Apple is offering a six percent discount for in-store purchases with its credit card through the holiday season. Apple Card holders get double the discount through the end of December, highlighting the tech giant’s desire to experiment with financial services to drive additional sales.
It seems the company is testing whether or not consumers are more likely to purchase its hardware with recurring installments outside of traditional wireless contracts. “One of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things,” says Apple CEO Tim Cook. He added, “…we are cognizant that there are lots of users out there that want sort of a recurring payment like that.”
Pricing Tactics and Buyer Behaviors Changing
Due to their technical capabilities, mobile devices have gotten more costly over time. For example, Apple’s most expensive phone model in 2015, the iPhone 6s Plus, retailed for $749. The most basic version of this year’s iPhone 11 costs $699. The Apple Card deal represents a viable option for reducing the price burden on consumers going forward.
In the past, it was common for shoppers to pay an upfront fee and sign up for multi-year contracts with wireless companies. Consumers would pay the remainder through their monthly bill payments, which were relatively easy to swallow. Now, both device manufacturers and wireless carriers are offering more flexibility.
Apple has developed several innovative payment plans to incentivize customers to stick with the brand. The company’s iPhone Upgrade Program allows consumers to get a new iPhone every year with AppleCare+ coverage in exchange for a monthly fee. You can also pay full price for a phone and walk out with no strings attached.
Most major wireless carriers offer plans today with unlimited calls and texts for monthly fees without longer-term contracts. Verizon is even offering Disney+ for a year when subscribers switch to 5G or choose an unlimited plan. Prices have gone up overall, but shoppers also have more flexibility when it comes to paying for services and devices.
Why is the Apple Card Special?
The Apple Card offers several advantages over traditional credit cards. In addition to offering interest-free monthly payments for new iPhones, the card pays daily cash back.
There are also no minimum monthly payments. Instead, the Apple Card gives users the option to pay what they want with a transparent estimate on how much interest they would incur. The card also provides spending summaries, much like what you would find through your Mint dashboard.
Apple isn’t the only tech company experimenting with credit cards. Uber recently relaunched a credit card with Barclays that offers generous cash back for uber purchases and select restaurants. Next year, Venmo will launch its first credit card to go along with its debit card. We’re likely to see other unique credit cards come to market over the next few years as brands look for ways to increase revenues outside of core business operations.