Don’t sign that cell phone contract

Cell phone sales in the USA have typically revolved around hooking the customer with low-cost (or free) subsidized phones in return for signing an expensive, long-term (usually two-year) contract for service.

This is bad for customers in many ways.

  • You can’t shop around for the best plan or switch plans when you want to.
  • If you realize your carrier’s coverage or customer service doesn’t suit you, you’re stuck.
  • The subsidized phones are often locked to that carrier and getting them unlocked is difficult or impossible.
  • To get the most value, you must upgrade your phone every 2 years. Otherwise you’re paying a built-in premium for a subsidized phone you’re not getting.
  • Even worse, those of us who want to upgrade more often get doubly screwed because we must pay full price if we’re outside the “upgrade window”.

For many years, this was the norm. But in the past couple years, a lot more options have opened up.

Buy an unlocked phone outright

Most smartphones these days cost upwards of $600. The cheapest iPhone 5s currently costs $650. If you think that new iPhone on display at your local carrier really only costs $199, think again… where do you think that extra $450 comes from? Jacked up monthly fees, of course.

But lately, we’ve seen a trend of high-quality, unlocked smartphones available for much less. Since these phones are unlocked, you can take them to any supported carrier and get a much cheaper plan.

  • My current phone, the Google Nexus 5, currently costs $350 brand new and unlocked. It’s one of the best all-around phones out there and always gets the latest Android updates. The Nexus line is Google’s flagship Android brand.
  • The Motorola Moto E, Moto G, and Moto X start at $130, $180, and $350 respectively. These are all great, highly capable Android smartphones at various entry points which have great reviews. The $220 Moto G with 4G LTE is an incredible value for the money.
  • The ZTE Open Firefox OS phone is an incredible $80 unlocked. It would be a great choice for first-time smartphone users who don’t need as many apps as are available on iPhone or Android.
  • The OnePlus One, running a customized version of Android named CyanogenMod which is known for its extra features and privacy options, will start at $300.

Get a cheaper cell phone plan

Once you have your own, unlocked, unsubsidized phone, you’re no longer at the mercy of any one carrier. T-Mobile has led the charge lately at targeting “bring your own device” customers with extremely competitive no-contract plans such as their Simple Starter 4G LTE plan for $40. AT&T likewise has numerous Mobile Share Value plans in the same price range, again with no contract.

T-Mobile will even buy you out of your existing cell phone plan if you switch to them and buy a new phone. Because they’ve done away with contracts completely, their subsidized phones work a bit differently: you can spread the price of your phone over one or more years, but that price is clearly indicated on your bill, and once it’s paid off your bill will drop accordingly.

Rethinking phone+service plans

Of course, there’s something to be said from getting your phone and service contract from the same company and some people still prefer this option. But you now have more options than ever before, including some truly new and innovative offerings that use nearly-ubiquitous WiFi connections while you’re at home or at the office for calls, text and data, then fall back to cell phone usage otherwise.

Republic Wireless and FreedomPop are two such examples. You’ll need to buy a phone from them up front but after their monthly rates are very attractive or even free.

Don’t sign that contract!

In short, there are so many options for going contract-free that it’s really difficult to justify signing or extending a contract for any one carrier. Going contract-free is even more beneficial as shared-device and family plans become more popular, because you don’t need to worry about whether everyone’s contract is up at the same time.

The bigger carriers have fought the move to contract-free plans because they enjoy not having to work too hard to keep your business. As these contract-free plans grow in popularity, they’ll have no choice but to follow suit.

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