Why You Should Never Sign a Cell Phone Contract Again
Like rocket science and high school relationships, cell phone plans are complicated for a reason. Two-year contract or early-upgrade plan? Month-to-month or pay-as-you-go? Individual or shared data?
Big carriers like AT&T and Verizon love it this way — they know most consumers won’t know a good plan from a bad one. When every choice is filled with exceptions, limitations and fine print, how can you even begin to compare your options? You’d be a fool to even try.
Well, call us fools, because we sat down and did just that. In order to keep things straightforward, we made a few assumptions up front:
1. You want a recent premium phone, not a clunker. We’re talking iPhone 6 or Samsung Galaxy S6.
2. You want about 2-3 GBs of data per month—enough to use GPS, browse the web, and check email on a regular basis.
3. You don’t want to worry about how many messages you’ve sent, so the plan needs to allow for unlimited texts as well.
Just by making these assumptions, the options—and the math—get a lot simpler. Yes, you can certainly save even more if you optimize your exact number of texts, minutes and data with a pay-as-you-go plan, but who wants to think that hard about their cellular service? So long as you just want a decent plan on a good phone, we’ve got you covered.
The four options, from worst to first
When it comes down to it, there are roughly four types of cell plans. We’ll order them from worst to first here, then break it down below.4) a payment plan, like AT&T’s Next or Verizon’s Edge
3) a two-year contract
2) a pay-as-you-go plan
1) a month-to-month plan (requires an unlocked phone with no contract)The payment plan: A wolf in sheep’s clothing
Payment Plans: The Big Two | FindTheBest
If you’re just looking for an individual plan, the first option is arguably the worst. The way the plan works: you pay $0 the day you get your new phone, but then you pay about $20 on top of your normal monthly fee in roughly 30 installments (the exact rate and number of installments vary by plan, but the overall concept is very similar). After 30 months of payments, you end up paying about $50 more under this method than if you had selected a two-year contract.That said, the payment plans allow you to trade in your phone early for a new one—typically at the 12-, 18-, or 24-month mark, depending on which option you choose. On paper, this makes the payment plan a cheaper option than the two-year contract—by our calculations, you save about $40 compared to a two-year contract if you trade in at the 24-month mark.
But all of this ignores one key wildcard: the resale value of your phone. A top-shelf phone like the iPhone 6 can potentially net you $400 after one year, or around $300 after two years, using a site like eBay or Gazelle. Once you factor in the resale value of your phone, the payment plan option is simply the worst way to go, whatever way you slice it. It’s no wonder the phone companies are pushing these the hardest.
The two-year contract: Still subsidized, still a bad deal
2-Year Contract Plans: The Big Two | FindTheBest
The two-year contract lets you buy an expensive phone (say, the $649 iPhone 6) for a seemingly inexpensive, subsidized price ($199). Naturally, however, the cost of the phone is baked into your monthly fee, and by the time two years have passed, you’ve paid the full price for the device…
Great information, and thanks for sharing with us! I have often wondered if it wasn’t cheaper just to purchase your own phone in spite of the large initial cost, and now I know it is. It’s not likely I’ll be signing up for another 2-year plan. 🙁
I dropped ATT a couple or so years ago and went for pre-pay by the month with no contract. I have 3 cell phones and my house phone all on the Straight Talk Plans. 2 cell phones are on 1500 minutes and unlimited text per month for $30.00. My house phone is on a $15.00 dollar a month with all the same features I had with ATT for a lot more money. My cell phone is iphone 5 unlimited text and talk along with internet. I pay $45:00 a month for it. I did buy all my phones . I find this set up has served me very well
Shop around on Ebay, Amazon, Kogan in Australia, or a reputable seller.
Don’t buy the latest ‘phone, buy a past edition new ‘phone, a new latest model will be old in 6 months.
Shop for Pre-paid deals, start at a low cost, get to know your usage and go up little by little as required.
Get a deal which includes roll-over of unused ‘minutes’ which can be used to buy extra data downloads or ‘phone call minutes.
Make sure you can take your own number to whichever company you choose.
Many new ‘phones have a smaller SIM card than the old design so the carrier can issue you with a new SIM card, or there are sized, printable drawings on the Internet to enable trimming the one you have to fit a new ‘phone.
I’d like to add Consumer Cellular to your list of, I think, great deals. I am a senior (sad, but true!), and for my Consumer Cellular Envoy phone (which has phone, camera, and probably several more features that I’ve never used), I pay the basic price – $10/month – and it gives me all of the services I presently need. It doesn’t take me to the internet – which is fine, I don’t think it has GPS – which is also fine because I have one of those, but it does provide safety for me (when I remember to take it with me!) in emergencies, it looks nice, and on my income, with no annual fee and no yearly contract, it just hits the spot. Oh – and for about double the amount of minutes, I now have the $19/month option, which is just one of several choices. Check it out! And thank you for my space here.
Yeah, what Shari said. 🙂 I have the same company, same phone, and same plan. Now I can access email on my phone (but, why?) and most importantly, send & receive pics from my son, my brother, & my best friend in England (25 cents to text or send a pic to him.) Wow, I better put the local news station’s number in there, in case I “see” the next big story.
I have been a no contract guy for a long time . it is the best no hassle if you don’t pay you just lose service . I like the unlimited because I don’t use the phone that much but the wife and daughter would . If I wanted mobile access to the internet I would just buy a Kindle fire or Chrome book type thingy . IO view a cell phone as a needful item but only to call when needed . I am not a gabber I hate talking on the phone “Hi when you coming home Ok Bye” that is my conversation size . Cheap yes and no it depends on what it is I am buying. guitars $1800.00 but phones 10 bucks is plenty
Sure, but where I live the only good service in this area is Verizon, not much choice here.
My daughter, when she chooses to visit, can’t get service from ATT in this area, Verizon is expensive, but I guess a necessary service for me.