The deals from carriers to sell the Apple Inc. (NASDAQ: AAPL) iPhone 8 have started. The Big Four carriers may not get a chance like this one again for over a year. The iPhone 8 discounts are meant to hold current wireless customers for each carrier, or perhaps to take some from the competition. One of the earliest deals is from AT&T Inc. (NYSE: T), which has a “preorder” deal for the iPhone 8 for $23.34 a month at 0% APR for 30 months.
AT&T will sell customers the iPhone 8 for $699, which allows people independence from AT&T’s long-term wireless programs. The 30-month deal iPhone model available for $23.34 is the 64 gigabyte (GB) version.
The requirements to get the low monthly price for the iPhone 8 are dizzying:
Credit approval required. For smartphones only. Tax on sales price due at sale. Requires 0% APR monthly installment agreement and eligible service. Divides sales price into monthly installments. AT&T Next: 30-month agreement with trade-in to upgrade when 80% of sales price is paid off. AT&T Next Every Year: 24-month agreement with trade-in to upgrade when 50% of sales price is paid off. $0 down: Requires well-qualified credit. Limit as low as 2 smartphones at $0 down. Down payment: May be required and depends on a variety of factors. Down payment if required will be either 30% of sales price or a dollar amount ranging from currently $0 to $600 (amount subject to change, and may be higher).
AT&T takes a very small risk that people will not stay the 30 months as customers. It levies heavy penalties on people who leave early:
If service is cancelled, remaining installment agreement balance is due. Examples: $749.99 sales price on AT&T Next (30-month) with $0 down is $25 per month, with $225 down (30%) is $17.50 per month, or with $600 down is $5 per month. On AT&T Next Every Year (24-month) with $0 down is $31.25 per month, with $225 down (30%) is $21.88 per month, or with $600 down is $6.25 per month. Activation or upgrade fee: $25. No upgrade fee for line with a smartphone purchased on an installment agreement prior to August 1, 2015
In other words, the customer signs up for expensive handcuffs. AT&T’s position is that it has bought the iPhone 8 from Apple and paid for that iPhone up-front. Without the customer’s 30 months of service, AT&T stands to lose much of the money.
The 30-month, 24-month or 12-month plans lose money for the carrier in the first several months. However, as the contract goes on, AT&T recoups the cost of the phone, its marketing costs and costs to provide the wireless service. If the customer renews beyond the 30 months, AT&T’s profit likely soars.
The margins for wireless carriers have frayed as Sprint Corp. (NYSE: S), T-Mobile US Inc. (NASDAQ: TMUS), Verizon Communications Inc. (NYSE: VZ) and AT&T play for position among customers in a saturated market. The iPhone 8 has given them a brief chance to go after one another with a new chess piece.
Credit Card Companies Are Doing Something Nuts
Credit card companies are at war. The biggest issuers are handing out free rewards and benefits to win the best customers.
It’s possible to find cards paying unlimited 1.5%, 2%, and even more today. That’s free money for qualified borrowers, and the type of thing that would be crazy to pass up. Those rewards can add up to thousands of dollars every year in free money, and include other benefits as well.
We’ve assembled some of the best credit cards for users today. Don’t miss these offers because they won’t be this good forever.
Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
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