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Best Buy Offering Free Trade-In for iPhone 5 (Update 2)

This story has been updated from June 1, 2013. The correct number of stores affected by the local municipality restrictions is actually 112, not 360, according to the most recent information received from Best Buy.

NEW YORK ( TheStreet) - Best Buy (BBY - Get Report) wants Apple (AAPL - Get Report) iPhone 4 or 4S users to trade in their phones at any of the electronics retailer's 1,400 stores for a new iPhone 5 -- but there is a catch.

On Saturday, June 1, for one day only, customers who trade-in any working iPhone 4 or 4S will receive a guaranteed $150 in Trade-In credit, making the iPhone 5 free, the electronics retailer says.

Customers must be eligible for the upgrade and activate the iPhone 5 on a two-year contract with Verizon (VZ - Get Report), AT&T (T - Get Report) or Sprint(S) to take advantage of the offer.

The deal coincides with a month-long promotion Best Buy kicked off last week where customers can save $50 instantly with the purchase of any iPhone with a two-year activation plan through one of the three carriers named above. The savings discounts the iPhone 5 to $149.99.

Consumers will only pay for any applicable sales tax on the new phone and any applicable carrier activation fees (typically around $35 and appears on the first bill from the carrier).

The iPhone is rarely discounted. Without signing a service provider contract, the iPhone 5 retails for $699.99, according to Best Buy's Web site.

When asked if the electronics retailer was looking to move inventory to make way for a new iPhone model, a company spokesman said: "We just want to introduce more consumers to our trade-in program."

Now here's the catch.

Full disclosure: I went to my local Best Buy in Baldwin, N.Y. on Saturday and tried to trade in my iPhone 4 but was told I could not without a Best Buy receipt for the original purchase. Since I purchased mine at a carrier store, I left the store with no trade-in deal.

Since there were likely other customers who also couldn't get the trade-in deal at their local store, I decided to contact the company about it.

While the company said that customers who purchased their 4 or 4s iPhones at another retailer or carrier store could still trade in their phone, due to local municipality law restrictions related to pawn brokers, approximately 112 Best Buy stores are legally prohibited from offering trade-in credit without a Best Buy-specific receipt.

Best Buy said that sales representatives are instructed to tell the customers where the nearest store that does accept trade-in devices without receipts is located. And that is what happened to me.

In a company statement, Best Buy said: "We greatly apologize to our customers and assure them that there are alternative stores in those areas where they can take advantage of the promotion."

Best Buy shares closed on Friday 0.7% to $27.55 on Friday afternoon. The stock is up 54% over the past 12 months.

-- Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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