Smartphone Financing: What You Need to Know

There are several ways to pay for this everyday necessity.

Reviewed by Pamela RodriguezReviewed by Pamela Rodriguez

Smartphones are necessary for many, but purchasing one outright can be costly. As of 2024, the average consumer cost for a premium smartphone model was $940. Financing is available through retailers, cellphone companies, cellphone manufacturers, or buy now, pay later (BNPL) platforms.

Key Takeaways

• Smartphone financing makes it easier to pay over time rather than up front.
• Options for financing a smartphone include promotional offers at retail stores, financing through cellphone providers and point-of-sale installment loans.
• Financing a smartphone may include a a steep annual percentage rate (APR) or fees.

What Is Smartphone Financing?

Smartphone financing allows buyers to make payments over time. When approved, they commonly make a small initial down payment, and the remaining balance in installments. Sometimes a down payment is required. With others, you may have a revolving line of credit.

Financing terms vary, such as repayment over 24 or 48 months. Smartphone financing can be advertised as 0% interest when paid in full within a specified number of months. However, if the balance is not paid in full before the end of the promotional period, interest charges may be applied retroactively to the initial purchase amount.

Important

Financing a smartphone is different from leasing one. Financing means consumers own it at the end of the finance term while leasing only allows them to use a phone for a set period.

Retailer Financing

Financing a smartphone through a retailer may require a hard credit check to qualify for store credit. While retailer cards can offer promotional financing, the regular variable annual percentage rate (APR) for purchases may be substantially higher than a traditional credit card.

Retailers like Best Buy offer 24-month financing on unlocked phones and Geek Squad purchases above a certain amount using a Best Buy credit card. No interest applies if the balance is paid in full within 24 months of sale. Purchases made with a Best Buy credit card can also earn rewards.

Carrier Contracts

Cellphone service providers like Verizon allow eligible customers to pay off devices in installments with zero interest and without finance charges. Consumers commonly need a three-year contract to take advantage of this benefit, and an upgrade fee applies.

Those who do not plan to change cellphone companies benefit most. Consumers who switch cellphone companies could trigger a fee if it means breaking their purchase contract.

Some phone service providers, such as Spectrum, offer financing without a contract and bundling deals for TV, Internet, and landline services.

Manufacturer Financing

Both Samsung and Apple offer promotional financing for customers who want to purchase new smartphones and pay for them over time. With Samsung, consumers apply for a financing account; with Apple, they usually obtain an Apple Card.

The advantage of this type of financing is that consumers can use it to purchase more than just smartphones. Samsung Financing applies to TVs or appliances, while an Apple Card can be used to buy AirPods, an Apple Watch, iPads, or a Mac.

Buy Now, Pay Later (BNPL)

Referred to as point-of-sale installment loans, BNPL platforms let consumers make purchases with a small down payment, and then pay them off in four or more installments. Affirm finances smartphones with Visible over 36 months. However, not every cellphone company works with BNPL platforms, so that may limit consumer options.

How Do Consumers Qualify for Smartphone Financing?

A credit check may be required to qualify for smartphone financing, and there may be other qualifications that you need to meet to be eligible for a smartphone payment installment plan.

What Is a Disadvantage of BNPL?

BNPL represents a growing trend in short-term financing and allows consumers to delay full payment on purchases. BNPL financing can lead to a cycle of debt for consumers with multiple payment installment plans.

Does Financing Include Cellphone Insurance?

Some rewards credit cards offer promotional APRs on purchases to finance a new phone. Consumers who hold these cards already receive their rewards and some cards like those from Chase also offer built-in cellphone insurance protection as an added benefit.

The Bottom Line

Smartphone financing makes sense for those who don’t have the cash to purchase a new phone out of pocket. When comparing smartphone financing options, consumers must check the terms carefully to know exactly how much they’re spending and when interest may accrue.

Read the original article on Investopedia.