iPhone financing with Apple Card: Is it worth it?

The launch of the iPhone 12 and the holiday shopping season are both upon us, and whatever Apple product you have on your list, one of your first questions is most likely: What’s the best way to pay for it?

Apple products are pricey, but the retail giant offers a range of financing options for customers. Most notably, the retailer gives Apple Card holders the ability to pay off new iPhone over a 24-month period with no interest. But customers can also choose financing plans from Citizens One or their service provider.

Read on to learn which purchase option might be best for you.

How to finance an iPhone with the Apple Card

The Apple Card, lauded for its mobile-first features and top-notch security, added a financing plan for new iPhone purchases at the end of 2019.

The program has since expanded to include a number of other financing options for Mac, iPad, AirPods, Apple Watches and other eligible Apple products. Exact repayment terms vary by product, with plans ranging from 6 to 24 months. If you are in the market for a variety of Apple products, the Apple Card can unlock flexible purchasing.

See related: Guide to the Apple Card

When you use an Apple Card to buy a new iPhone, you’ll automatically get 24 months to pay it back without accruing interest. Your minimum monthly card payment includes equal monthly installment payments that chip away at the total cost of the device – so you don’t have to keep track of any extra bills.

If you already have an Apple Card, there’s no additional hard pull to approve you for this installment plan. You’ll automatically be eligible just for being a cardholder. Additionally, you’ll earn a generous 3% cash back on your purchase.

See related: Apple Card Daily Cash: Deep dive

Unfortunately, there is one big downside to financing a new iPhone this way. When you buy a new phone on your card, it reduces your available credit. This can negatively impact your credit utilization ratio, especially for a more expensive phone.

This is especially true if your credit limit is low to begin with. For example, if you have a $3,000 credit limit on your Apple Card and finance a new $1,200 iPhone, you’ll be using 40% of your available credit until you incrementally pay down your balance. Plus, if you are carrying a balance on other, non-iPhone purchases made on the card, it will reduce your available credit even further.

Before deciding to purchase a new iPhone with an Apple Card, consider your current credit limit and how it will affect your utilization.

See related: How to increase your Apple Card credit limit

Other iPhone financing options

In order to finance a purchase with an Apple Card, you must either be a current cardholder or apply for one when you go to make your purchase. For some, the idea of another credit card account might be a turn-off – even if you are looking for alternative financing options to pay over time.

The Apple Card offers a good rewards rate for fans of Apple Pay and heavy Apple spenders, but it doesn’t make sense for everyone. Plus, there’s no guarantee you’ll be approved for the Apple Card. Luckily, Apple still offers several other payment plans for non-cardholders.

See related: Apple card approval odds and reasons for denial

Citizens One loan

Before Apple Card, the retailer partnered with Citizens One bank to offer a similar financing plan for those who need to pay off their iPhones over time. Just like an Apple Card financing plan, a Citizens One Apple loan comes with no added interest, and the price is always split over 24 equal monthly installments.

The bank offers two repayment options: Apple iPhone Payments or the Apple iPhone Upgrade Program

• With Apple iPhone Payments, you pay for the phone and sales tax with no interest in 24 equal installments. Apple Care is not included, but you can purchase it as an extra. This option is nearly identical to the Apple Card installment plan but is financed through Citizens One instead of Goldman Sachs.
• With the Apple iPhone Upgrade Program, you also pay for the phone and sales tax cost as if you were paying for 24 months of equal installments with no interest. However, Apple Care is included, and after you’ve made at least 12 payments (over a minimum of six months), you can upgrade to the latest iPhone model, trade in your old one and start a fresh 24-month loan with no penalties.

Service provider

Some cellphone carriers, like AT&T and Verizon, also offer installment payment plans for iPhones. Terms and conditions vary, so contact your service provider to ask about specific options for you. Additionally, many of these plans use a risky deferred interest model.

Credit card with an intro APR

If you are a disciplined credit card user, you can also design your own payment plan for a new iPhone by signing up for a credit card with a 0% intro APR. Since you won’t be charged equal monthly installments, you’ll need to create your own payment plan and stick to it in order to eliminate the balance during the introductory period. But with the right card, you can get up to 18 months to pay off your phone – and potentially earn rewards on your purchase.

See related: The best credit cards for Apple purchases

This is a particularly good option if the Apple Card doesn’t make sense for your long-term rewards goals. Rather than sign up for the Apple Card to get interest-free financing, you can sign up for a card that better aligns with your lifestyle.

Is financing your phone with the Apple Card worth it?

In many cases, it can be a good idea to finance your new iPhone with the Apple Card. Not only will you earn 3% cash back on your purchase, but you can also save on interest charges and pay off the phone over time.

However, while this plan is great if you are already interested in the Apple Card, there are other financing options available with similar terms. Make sure the card is right for you beyond that purchase before you sign up.