How in the world does these threads become holier-than-thou teachable moments? Hahaha. The OP isn't spending money he doesn't have, he's merely getting a replacement on a defective device he already paid for. Where his gripe remains is that Apple is holding even more cash hostage on his account as he sends in the defective phone under warranty. If everything checks out, as it should, his money will be released and all is well, but for the moment he's in dire straits since there isn't $700 in his account, especially since Apple explicitly said this would not happen. I completely understand this.
A good rule of thumb going forward for now for apple products is that unless its a hardware problem that hinders the usage of the device on the basic level (i.e. no Internet connection, can't make calls, absolutely no sound, etc.), make time to go to an Apple Store to get it switched out there. It could be a hassle, but it would stop this from ever happening again.