Contract Free at Last

October 01, 2013

For the past several months, many of my friends and co-workers have been hinting that it is time for me to upgrade to a new cellphone. I wasn’t quite at the same point as comedian Bill Hader in the commercials where he has bandages on every finger due to a broken screen, but I did sound like a broken record from another cell phone commercial as I repeatedly would say “Can you hear me, can you hear me now?” My biggest hesitation in getting a new phone was having to get locked into yet another 2-year contract with my current carrier if I took the bait of their 99 cent upgrade offer.  Instead, I finally took action and went contract-free, but that entailed having to pay outright for a decent smartphone. Since I don’t have to be totally cutting edge, I went for the iPhone 4 instead of the iPhone 5 and here’s where I will save in the long run:

2 Year Renewal  Contract on Current Carrier vs. Contract Free with New Carrier

Cost of iPhone 4        $0.99                                            $349

Monthly costs             $90  after taxes and fees          $45  flat fee, no tax or additional fees

(unlimited talk, text, web with both carriers)

Early Termination fee  $175                                          $0             

Although the phone cost me more upfront, the monthly fee is now half of what I was paying and I can cancel at any time without any termination fee.  In just 8 months, I will break even for paying upfront for the phone and over the 24 month period, I end up saving $731.99 – which should be more than enough savings to pay for my next new phone. Best of all, so far I haven’t had to say “Can you hear me now?”

Some of the carriers are offering a new deal where you can avoid both the handcuffs of a new 2 year service contract AND the upfront cost of a phone upgrade. All you have to do is pay around $25 per month (this varies slightly depending on the carrier) and you can then upgrade typically in a year to another new phone. But if we do the math, that monthly fee that is spread over 20 to 24 months ends up costing $500 to $600 – almost double what I paid upfront for my phone!  So find a calculator app and crunch the numbers before you upgrade to YOUR next phone.