Why Paying for a Cell Phone Upgrade Plan is Just Plain Silly

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upgrade plan

T-Mobile started this new movement with cell phone carriers: get people to pay full-price for their phones and then they can upgrade sooner. Here’s basically how these plans work:  you get your phone, agree to pay full-price, and then stretch your bill for the phone itself out over the contract period.  As long as you’ve paid a certain percentage of your device off, you have the option of upgrading your phone sooner than you normally would.

You could do that, but it would be silly.  Have you ever wondered how these companies can offer a $650 iPhone for a promotional price of $200 when you sign a new contract?  The profit loss is already built into the price of your service plan.  It’s called a phone subsidy and you’ve been paying it all along.

So now these carriers are trying to convince consumers to continue to pay the same price for service plans and then pay for the cost of the phone on top of it.  So you’re paying full price for your phone, but also paying for a subsidy charge.  You’re paying for your phone twice.  Why would anyone want to do that?  Because they’re marketing it to you really well.  By giving you the “freedom” to upgrade sooner, they can make oodles of more money.  If these plans sell enough, they may even be able to get rid of the up-front subsidized discount all together while still charging the subsidization fees.  So I’m all about everyone NOT buying one of these plans.  Because I like my subsidized discount.  I want to keep that option on the table.  And I don’t want to pay for my phone twice.

(To be fair, Verizon and AT&T are the worst culprits.  Sprint does offer you $15 off your bill a month, IF you have one of their biggest plans.  T-Mobile charges less [thus eliminating that double payment referred to above] if you have one of their upgrade plans, but there is a $10 service fee each month.  Or you could just switch to Republic Wireless and spend $20 a month on your bill instead of hundreds.)

10 thoughts on “Why Paying for a Cell Phone Upgrade Plan is Just Plain Silly

  1. Done by Forty

    I’m with PTel & pay $10 a month (some months we still have some money left over, so we pay nothing). I agree that these upgrade plans are a sneaky way to get consumers to pay twice. As the costs of the phones are baked into the monthly bill, it’s difficult for consumers to itemize their costs.

  2. thebrokeandbeautifullife

    I don’t understand why anyone would ever need a new phone more than once every two years (unless it’s broken beyond repair). I’ve never spent money on the cellphone itself. I get my free upgrade and don’t pay a penny more and it suits me just fine.

  3. The Frugal Exerciser

    I loved my Motorola Atrix but it broke in June and At&t offered me a new Iphone 4s for $1. My cousin, who is always the first in line for new Apple products, yelled at me for getting an OLD phone. I told him that I don’t use the phone to it’s fullest capabilities anyway so why spend a bunch of money for the latest model. If they didn’t breakdown so fast, I probably would keep a phone for a least 3 years.

    1. femmefrugality

      I’ve kept a phone for three years before. The only reason I got rid of it was because I switched carriers and got a new phone. 🙂 An iPhone for $1? I’m all about last season stuff if you can get it for that cheap!

  4. therandompath

    I have AT&T, and our bill is crazy. But we have 6 months left on it, and then it’s buh-bye! The price of cell phone plans is ridiculous; I think I’m in the wrong line of work 😉

  5. Pingback: Making the Switch: How I’m Saving $100+ Every Month on My Cell Phone Bill | Femme Frugality

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