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The iPhone Upgrade Program: A Year in Review

I now have an iPhone X and have returned my iPhone 7 Plus, thus completing one full cycle of Apple’s iPhone Upgrade Program, and I thought I’d share my impressions and answer any questions you may have.

For those out of the loop on the iPhone Upgrade Program, here’s a quick refresher. In the United States, cell phones used to be sold by carriers on a two-year contract. You’d get the phone at a low, subsidized price, usually $200 or so, and would pay off the rest of the phone’s cost as part of the service fee for the next two years.

Carriers tired of this approach, and after T-Mobile successfully implemented an installment plan for buying the iPhone 5 in 2013, the industry began phasing out subsidized phones and contract service.

Some pundits, like Jay Yarrow, formerly of Business Insider, claimed that this would doom Apple. But as we now know, that was far from reality, because Apple adapted to the new environment.

Many people don’t want to cough up the $649 to $1348 for a new iPhone all at once, so carriers started offering installment plans that let customers pay the phone off over 24 months. Most of these plans let you trade in a phone after a year or so for a new one, assuming the phone is in decent condition. Apart from activation fees, this installment approach costs you nothing extra beyond perpetual device payments. If you pay off a phone instead of trading it in, it’s yours to keep.

Apple, seeing a market opportunity, launched its own installment program, the iPhone Upgrade Program, which is essentially the same as the carrier installment plans, except that it includes AppleCare+, which explains why its monthly fee is higher than plans from the carriers.

(I got a chance to use AppleCare+ with my iPhone 7 Plus since I stupidly broke the screen while on vacation just days after acquiring it. Getting it fixed required a typical Apple Store visit with the two-hour drive, two-hour wait in the snooty mall with no food, followed by a two-hour drive home. However, I paid only $29 plus $2.68 in sales tax for the repair instead of the usual $149 fee. You get two screen replacements with AppleCare+ at that price before you have to start paying full price to fix a cracked screen.)

Now, to take some of the mystique out of all of this: the iPhone Upgrade Program is actually an interest-free loan administered by Citizens One. Every year, when you order a new iPhone through the program, Citizens One checks your credit (a “hard pull,” which can negatively affect your credit score) and issues you a new loan if you’re approved.

Despite being administered by a third party, the iPhone Upgrade Program has some uniquely Apple pros and cons.

iPhone Upgrade Program: Hands-On Experience — My first impression of the iPhone Upgrade Program in 2016 was not great. It was the middle of the night, and not only was I sleepily fumbling to order an iPhone 7 Plus quickly, I also had to fill out a loan form. It wasn’t onerous, but when you’re fighting the rush and unstable servers, every second counts. Everything went through, but the extra paperwork prevented me from getting the iPhone 7 Plus on day one — it arrived a week after launch.

I know, that’s the very definition of a first-world problem, but because I do this for a living, I’m under pressure to get Apple products as soon as possible so I can tell you about them. Also, it stands to reason that iPhone Upgrade Program customers are Apple’s most loyal and want each new iPhone right away.

(One note for American iPhone customers. While Apple sells you an unlocked phone via the iPhone Upgrade Program — another upside of the program, especially for international travelers — that’s only true if you’re a customer of one of the four major carriers: Verizon, AT&T, T-Mobile, and Sprint. Apple will not sell you an unlocked phone with no plan, nor will it sell you a phone that works with Virgin Mobile, even though Virgin Mobile is an iPhone-exclusive carrier. Also, the iPhone Upgrade Program only offers the latest iPhones, so you can’t use it to buy last year’s model.)

After you place your order, there’s no way to know if Citizens One has approved you until you receive an approval email. That could take hours or even days, so if you’re trying to beat a rush, it adds extra stress. And if you entered something incorrectly, which is easy to do in the middle of the night, you’re set for an even longer delay. I hope Apple improves this onboarding process in the future.

However, Apple made up for it this year, when it came time to order the iPhone X. Several days before pre-orders began, I was prompted to open the Apple Store app, choose my model, and work through the approval process beforehand. When pre-order madness hit in the middle of the night, it took only a couple of taps on my iPhone to complete my upgrade. Some iPhone Upgrade Program customers didn’t receive their iPhones on the first possible day, but it seemed to give us better odds. As it should, since we’re giving money directly to Apple instead of a third-party seller.

Once you’re in the program, everything is automatic. The credit card you supplied when you signed up is charged automatically every month. And yes, that’s another catch — you must have a credit card to sign up for the iPhone Upgrade Program. Debit cards are not allowed.

Also note that you’re charged the full amount of sales tax up front, in addition to your first monthly payment. Be aware of that if you’re on a tight budget.

The process of returning my iPhone 7 Plus was easy. A few days after my iPhone X arrived, I received a nondescript cardboard box containing a bag, a SIM removal tool, two pieces of tape, and instructions. All I had to do was reset the iPhone 7 Plus, pop out its SIM card and replace the empty tray, drop it in the bag, put the bag in the box, tape up the box, tear away the shipping label to expose the return label, and hand it to the FedEx guy when he next delivered a package. It’s almost as painless as Apple could make it; if you’ve ever sent a device to Apple for repair, that’s a similar experience.

A few days later, I received an email from Apple letting me know that my trade-in was complete and that my loan had been closed. That was a relief, because my iPhone 7 Plus had a gouge in the back. If Apple had been dissatisfied with its condition, I could have been charged a repair fee. Fortunately, Apple doesn’t seem to be that particular, although I presume a cracked screen would require repair.

Where the iPhone Upgrade Program Fails — Apple products are like rides at Disney World: they work great as long as you’re behaving as expected, but the second you go off the rails, things get messy. The iPhone Upgrade Program is no different.

As long as you stick to the plan, the iPhone Upgrade Program works flawlessly. But if you need to change a payment method, want to pay off a device early, or need to make up a payment, you have to deal with Citizens One, because Apple handles none of that. And dealing with Citizens One requires creating an account with them, which you otherwise don’t have to do.

Happily, I had no problems and only created an account while researching this article. Which is good, because the process is agonizing. I didn’t keep count, but it probably took 30 to 40 attempts to create a username/password combo that Citizens One would accept. Check the screenshot for the inane list of password requirements.

Once I logged in, there wasn’t much the Citizens One Web site would let me do. You can change the payment method, and that’s about it. I dug around until I found a link about paying off my iPhone early, and it told me to call them. Ugh.

That said, in my experience, Verizon, from which we bought my wife’s iPhone, isn’t any better. Although the Verizon site offered a large, red, PAY OFF YOUR DEVICE button, I couldn’t get it to work, and I ended up paying off my wife’s iPhone via customer support chat. I’ve been told that AT&T makes it easy to pay a phone off early from its Web site, but it only lets you pay off the full amount, not make multiple early payments.

Ideally, I should be able to make early payments or pay off an iPhone entirely from the Web site, without having to have a conversation with anyone. I suspect that Apple and the carriers don’t want to make this easy, because they want you paying in perpetuity.

If you’re an iPhone X user on the iPhone Upgrade Program, you might find yourself dealing with a hassle in 2018, especially if you want the latest iPhone immediately. The iPhone X arrived a month after the iPhone 8, but if Apple releases the next top-tier iPhone in less than 12 months — the minimum number of payments Apple requires before you can trade up — you may have to wait until you have made the equivalent of 12 payments:

You will still be eligible to upgrade next year. However, your new upgrade eligibility date will be determined by the start date of your new iPhone Upgrade Program loan. Please note that you are eligible to upgrade after six months in the program, as long as you have made the equivalent of at least 12 payments.

Other iPhone Upgrade Program members have told me that if you attempt an early upgrade via Apple’s Web site, you’re prompted to pay the remaining amount to equal 12 payments directly to Apple. So if you’ve had your iPhone for only 10 months and you pay $45 per month for it, you’ll be required to pay another $90 to upgrade right away.

The most annoying part about the required cycle is that if you have to wait even a week to order a new iPhone, you may end up waiting much longer to receive it as shipping times slip further and further out.

I’ll withhold judgment until next year, but if the iPhone Upgrade Program makes me wait a long time for the next iPhone or pay an outrageous fee to get it on time, I’ll seriously consider alternatives.

Is the iPhone Upgrade Program Right for You? — When the iPhone Upgrade Program debuted, you had to go to an Apple Store to purchase or trade in an iPhone. It was hard to endorse then, but now that you can complete the entire cycle remotely, it’s a lot easier to recommend.

The iPhone Upgrade Program is probably the best bet for dedicated iPhone enthusiasts who always want the latest device but don’t want to pay all at once. And if you tend to be rough on your devices, AppleCare+ is a far better deal than the insurance offered by the carriers.

Here are two questions to ask before signing up:

  • Do you need or want AppleCare+? For iPhones with exorbitant repair costs, like the iPhone X, AppleCare+ is a good idea. But if you don’t have an Apple Store nearby, AppleCare+ may not be your best bet for insurance.
  • Are you tempted by non-Apple phones? If you’re considering an Android phone, you may not want to be locked into Apple’s program. (However, perusing Apple’s fine print, it appears that you can get out of your commitment a year early by upgrading to a new iPhone and then returning it. Your mileage may vary.)

For many iPhone users, I think the iPhone Upgrade Program is a financial win because you don’t have to pay for AppleCare+ up front. You can keep the iPhone if you wish, but if you want to switch, you can do so after 12 payments. It offers more flexibility than buying it outright. And if you buy one outright every year, unless you have the hustle to sell your old phone each time, you’re going to end up paying more than you would through the iPhone Upgrade Program.

Also, if you’re wondering: yes, you can buy more than one iPhone through the iPhone Upgrade Program. The trick is, when you come to the choice of “I’d like to enroll” or “I’m already part of the program,” choose “enroll.” That lets you set up a second Citizens One loan.

Despite some small caveats, Apple has rewarded my faith at every step. I originally signed up for the iPhone Upgrade Program with the hope that the company would allow trade-ins by mail the following year, and that came to pass. Over the next few years, I anticipate the iPhone Upgrade Program will become Apple’s preferred way to sell iPhones, and those customers will be incentivized to buy directly from Apple. For serious Apple fans who want the latest iPhone every year without a large up-front payment, it’s a good choice.

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