Cell Phones: Contract vs No Contract Plans

Shopping Savings
on January 17, 2013

Deciding on a cell phone can be as easy as just buying today’s trendy phone or as difficult as in depth research to find the best phone and plan for your needs. The combination of phones, plans and carriers can be very confusing. Recent years have seen a rise in yet another option, the no contract plan. How do you decide if a no contract plan is the right plan for you?

A conventional contract plan subsidizes the cost of the phone, allowing you to pay it out over the contract period. That allows you to get a more expensive phone with more bells and whistles. A no contract plan allows you to bring your own phone or buy one from the carrier at full price.

Which type of plan will save money? Part of the answer depends on how you use your phone. Part of it depends on how much money you want to spend up front for a phone. The iPhone is available on most carriers now, giving a good baseline for comparison. Here is the two-year cost for Verizon, AT&T and Virgin Mobile. All plans are unlimited voice and text:

#1: The Largest US Carrier: Verizon

Plan Up-front cost Monthly 2GB Phone Monthly 2 Year
of iPhone 5 data plan subsidy Total Total

2 year contract: $199 and up $60 $40 $100 $2599 +tax/fees
Full Price: iPhone Plan $649.99 $80 $0 $80 $2570 +tax/fees

Verizon has a CDMA network, so if you decide to leave them for any reason, the iPhone becomes an expensive iPod Touch. Because of the effort required to reprogram a CDMA phone, most CDMA carriers will not accept a rivals phone. For twenty-nine dollars, a two-year contract with Verizon may be your best option.

#2: AT&T

Plan Up-front cost Monthly 4GB Phone Monthly 2 Year
of iPhone 5 data plan subsidy Total
2 year contract $199 and up $70 $40 $110 $2839 +tax/fees
Full Price $499.99 $70 + $40 per $0 $110 $3139.99
iPhone Plan smart phone +tax/fees
ATT Only Offers iPhone 4S refurbished for Month to Month

A chat with an AT&T representative confirmed that there is no difference in the monthly cost if you buy the iPhone out-right or go with a two year plan. Unless you plan to leave AT&T in less than two years, it would be foolish to pay more money for a refurbished older phone. AT&T has a GSM network. To move to another GSM provider requires unlocking the phone and changing the SIM card.

#3. No Contract: Virgin Mobile

Plan Full cost Monthly 4GB Phone Monthly 2 Year of iPhone 4S data plan subsidy Total Total

Full price $449.99 $55 per $0 $55 $1769
iPhone 4S Plan smart phone +tax/fees

At $1769 over two years, Virgin Mobile has the best value for the money. Unless you must have the latest iPhone, they are $700 – or more – cheaper than the competition for similar phones. If one of your goals is saving money, Virgin Mobile deserves consideration. Virgin Mobile uses a CDMA network.

There are a number of month-to-month only carriers. Some are regional, some are nationwide. Most are similar in price to Virgin Mobile. Not long ago these carriers only had phones that were a few years old, but now they are getting phones smart phones with the latest operating systems and 4G data. They provide good value for the money spent.

Information from:
http://www.verizonwireless.com
http://www.att.com
http://www.virginmobileusa.com

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