No Joke: You Can Make Money by Upgrading to the iPhone 7 [UPDATED x4]

Some things are too good to be true. But every now and again, the world offers you an opportunity to feel like you got the lucky ticket for two on an all-expenses paid vacation to Disneyland. This isn’t quite that good, but I don’t know many people who would say, “No,” to a free iPhone, let alone one that can make you money. Here’s how you can have cash left over after upgrading to an iPhone 7…

Thanks to our oddly monopolistic yet somehow still-competitive quad-carrier setup in the U.S. (AT&T, Sprint, T-Mobile, and Verizon have about 95 percent of the U.S. cellular market share), AT&T and Verizon are offering an amazing trade-in promotion for a new iPhone 7 purchase (Update: Apparently, John King said his experience with his T-Mobile trade-in offer was even better. Ask when you get into your carrier about current promotions).

[UPDATE: In another conversation with AT&T, I was now told a 2-year contract would not be required for this deal. While I am still skeptical of this, I am hopeful and will add updates as I actually go through the process. Whatever the final transaction, this article will be updated with the deal AT&T eventually does honor. More information on this change comes at the end of this post. This is now confirmed. I finally was able to go through the process yesterday at an AT&T store. They are crediting my account $650 for a 16 GB iPhone 6 that I bought for just over half of that in the end. There were no changes to my contract or cell phone plan and no need to sign a contract.]

On any normal day, a trade-in deal is a great way to get the absolute worst value for your phone. But remember, this is your lucky ticket day. AT&T and Verizon are offering $650 (not “up to $650,” but actually and exactly $650) in credit toward your iPhone 7 purchase with the trade-in of any iPhone 6, 6 Plus, 6S, or 6S Plus in good working order, with the screen intact, etc.

I cannot speak to the Verizon program’s claims, as I haven’t gone through the process yet. But I have spent plenty of time with AT&T support to verify this deal is legitimate. Therefore, the AT&T deal is what I will detail below. Verizon customers: check with a Verizon representative about their offer. Everything I have researched makes it appear to be an almost identical program to AT&T's.

Caveats

There are, of course, a few caveats with how you have to set this up. I’ll cover those right away, but bear in mind that the value of this deal outweighs any of these caveats; and in many cases, there’s a way around it.

1.) First, you need to have a fairly recently released iPhone in good working order to trade in. Anything that’s the iPhone 6 model and up will work. But current iPhone SE and iPhone 5 and earlier owners, you can get around this with the same process some of us iPhone 6 and 6S users will use — read on!

2.) You’ll need to be out of your contract and therefore be free to sign a new one (there’s a way to make this worthwhile, but no way to get around signing a new two-year contract that keeps you with that company). UPDATE: You still need to be out of any current contract commitments, but supposedly, you actually do not need to sign a new contract. I am skeptical of this, but read the update below for more. This is now confirmed. I did it -- worked perfectly.

3.) You have to use AT&T Next as a payment option. This is, in fact, a blessing, as you automatically get to finance your phone and keep that major chunk of cash in the bank while you slowly pay off your phone over time. But moreover — remember — you won’t really be paying anything (almost). Read on for details.

4.) There might be multiple forms of up-front payments, but at the end of the day, this does actually make financial sense. [Tax on the device, where applicable, and a one-time $20 upgrade fee were the only up-front charges.]

5.) Finally (this could easily be Number 1), you’ll need to actually want the iPhone 7.

Why None of That (Up There^) Matters

1.) If you don’t have an iPhone 6 or newer/better, you can easily go buy one in good condition for as little as $300. In fact, for anyone that doesn’t have a low-end iPhone 6, you should just go out and procure such a phone to have for your trade-in so you can keep your current phone to sell, as it could be of a greater value to you than that used 16GB iPhone 6 you can now get for about $300 on sites such as eBay and Craigslist (always be safe online and out in the world for any purchases you make).

2.) My sister, for example, has a contract that expires this November. However, this deal still works in her favor if she’s willing to spend some money up front (what follows may or may not apply to you — ask your AT&T rep). She can cancel her contract for a rather steep $105, but that will discount her monthly line access charge by $25 per month right away, which will save her $50 between now and November, which is when she’d normally be eligible for that discount at the end of her contract. This means it’s a $55 charge to cut her contract now and take advantage of this deal while it lasts. The benefits of all of this far outweigh this small charge.

3.) AT&T Next sounds complicated and scary, but it’s really not. In truth, it’s simply an interest-free loan for a new iPhone that you pay off over time on your bill every month. No one should be paying outright for their phone unless they want their phone unlocked for easier and cheaper global service. But even then, you’ll want AT&T Next (you can pay off the entirety of your phone at any time you wish, at which point you can get your phone unlocked right away — so travelers: you, too, can and should take advantage of this deal).

4.) Okay, okay. This one you can’t get around. Unless you live in a sales-tax-free state, you will be paying something. Whether it’s the up-front payment of the tax on your device (Uncle Sam’s generous donation still applies) or the difference between the $650 credit and the cost of the iPhone 7 model you actually want to purchase, you’ll be paying something to get those new camera features (that’s why we’re here, right?). But at the end of the day, no one else is going to give you more than or even up to $650 for your phone right now; and waiting for your phone to depreciate another $100-$200 while you pass this deal up isn’t a great idea, financially, unless you literally never plan on upgrading.

The going rate for my 128GB iPhone 6S is, at most, $550 on Craigslist. It could easily be even lower since Apple now made it just $100 more for a brand new version of that phone with a full warranty. The only more expensive iPhone is the 128GB iPhone 6S Plus, which might get you $650 if you’re lucky. But this is all forgetting the best way to do this. Remember Number 1… Keep your current phone if it’s a nicer model and go get yourself a bottom-of-the-line iPhone 6 that works well. 

5.) Spoiler Alert: The iPhone 7 doesn’t have a standard audio jack. Shocker! Oh, Lee Morris already told you? Well, he’s right — sort of. No, the iPhone 7 doesn’t have an audio jack, but progress rarely comes without a beginning sacrifice. The truth is, wireless audio is the way to go. Yes, Apple missed a huge opportunity to create and announce a new wireless standard or some kind of Bluetooth magic that made Bluetooth audio sound as good as plugging in. But at the end of the day, unless you’re going to leave the iPhone as a product behind forever, we’re all going to need to get used to this eventually. Apple won’t back down from this for the next iPhones, either. So with that, stop complaining, use a dongle for a while, and take advantage of a deal that makes financial sense.

How This Works, Exactly

So I still haven’t really explained how this works, but below, let’s go through the specifics of what I’m doing to cash in on this offer. This situation is specific to me, but anyone can do this. A broader outline will follow.

Here we go:

I’m on AT&T, and my contract expired (the 12th of September). That’s convenient. But again, this could still be financially sound depending on where you are in your contract. I have a 128GB iPhone 6S that my iPhone 7 will be replacing, but I’ll be saving it and will find a cheaper iPhone 6 to trade in instead. Once I buy a 16GB iPhone 6 for about $300 on Craigslist and sell my current iPhone for about $500-550, I’ll be up at least $200.

Pause. Note we’re at a $200 credit at the moment. That’s because I have a really nice phone to begin with. You may not be in that position, but we’re going to stick here for a moment and settle up at the end.

Continue. That iPhone will get me a $650 credit toward any iPhone 7 I want if I do it through AT&T Next. But I want an iPhone 7 with 256GB of storage. Normally, that phone would entail a monthly payment of $35.38 for 24 months. But AT&T will credit me $650 over those 24 months, bringing the payment down to a very affordable $8.30 each month. The math is kosher: my $200 upgrade on the $650 price is paid for by that $8.30/mo payment ($8.30 x 24 = $199.20 — I even save another 80 cents on the upgrade price). So at this point, I am paying AT&T $200 for my phone.

Pause. Now that I’ll spend my $200 credit from my iPhone switch-a-roo game for the $200 upgrade to get the $256GB model, I’ll be at about a net cost of $0 (I suppose I’m making $0.80, actually), only now I have a brand new iPhone 7 with a massive amount of storage compared to my depreciating iPhone 6S. But I also have signed a new two-year contract that guarantees AT&T that I’ll stay with them (note that I can still change my plan with them; but I have to stay with them as a post-paid wireless customer for two years). So if you're planning on switching carriers soon, don't do this (or better yet, do it with Verizon if that's where you're going).

Continue. I do, however, have to pay a $20 one-time upgrade fee to AT&T as well as sales tax on my device, which is $74.29 on the $849 256GB iPhone 7. That puts me at a deficit of $94.29 to trade my iPhone 6S for a brand new, under-warranty iPhone 7 with twice the storage.

A Few Extra Points

That was my specific situation, but if you have my phone and want to keep the same storage, you would pay $100 less (while saving another $8.75 on tax in California), which would mean you could get a cappuccino with an extra shot and organic milk at a really nice coffee shop with your change. If your sales tax is less, if you have an even more expensive iPhone than mine, if you’re okay with an iPhone 7 with even less storage — in any of these situations, you end up on top.

I Have an Older iPhone

Let's say you still have an iPhone 4. First, I'm really sorry, but equally excited for you. You can still go out and get a $300 low-end iPhone 6, get a $650 credit toward an iPhone 7, and then sell your iPhone for slightly under $100 online. The net cost of a bit over $250 to you in exchange for jumping six generations of iPhones is remarkably good. But do yourself a favor and spend $100 more for four times the storage. Paying that off over those 24 months will only cost you $4.17 per month.

I Need an Unlocked Phone

If you’re a globe-trotter, you might want to have an unlocked iPhone. And if you do travel so much, you’re well-aware by now that the only way to do that is to pay for your entire device up front. However, you can actually choose an AT&T Next plan, take advantage of this great offer, and pay off that plan at any point in time in its entirety. At that point, AT&T will unlock your phone. You can therefore even wait to pay off your phone until your next trip. There’s no penalty for doing this whatsoever. You still have to keep your 24-month plan with AT&T in the United States. But you are free to take your SIM card out and insert a local one while traveling to save a buck on those outrageous international calling costs.

Darn, I Already Ordered My iPhone 7!

Don’t worry! An AT&T representative told me that I could walk in with my already-activated (or not) iPhone 7 when I get it, bring in any working iPhone 6, 6 Plus, 6S, or 6S Plus, and simply ask for the offer, and it would be honored once they verified the trade-in device was in good working order. This was verified with his manager and then again with that person’s manager. The deal was so good, they were all confused until they ran it up the chain. And it checks out. If need be, I even have the chat transcripts to take into the AT&T store.

Best-Case Scenario

The best-case scenario is that you already have the super expensive 128GB iPhone 6S Plus. You then go and get yourself a cheap iPhone 6 for $300 for your trade-in device. Sell your giant drop-liability for about $600, and somehow be okay with getting a 32GB iPhone 7 for $649 plus tax, but then live in a state like Oregon that doesn’t have sales tax. Over time, AT&T pays even a dollar over your monthly fees whenever they come up, leaving you with the new phone and a $300 positive difference between the trade-in and the $600 you get from eventually selling your current phone.

Apply that $300 to tax, a storage upgrade, an upgrade to the 7 Plus, your early contract termination fee, etc., to figure out your potential immediate net gains or losses. But no matter how you cut it, these are the best deals for new-release iPhones to come around in quite some time.

Update: Your minimum plan cost must be $50 to take advantage of this deal. But I don't know of many iPhone/data plans that are less than that.

Update 2: Supposedly, you actually do not need to sign a 2-year contract for this deal. See the chat transcript below:

Update 3: T-Mobile (as John King mentioned in the comments below) and Sprint also have various trade-in offers worth exploring.