The cell-phone industry is changing, and you may have already noticed your phone cellular carrier trying to push you into a no-contract phone plan, that’s because the two-year contract is becoming extinct. Many carriers have already dropped their two-year contracts completely and those that haven’t are soon to follow.
The movement to end two-year contracts began a couple of years ago when T-Mobile stopped offering it and eliminated the option altogether. Since then, over the last couple of year many other big name carriers have been debating whether or not to follow suit and stop offering 2-year contracts to their customers.
This of course was done behind closed doors and although there were rumors going around that carriers where going to drop two-year contracts, it was not publicly announced, leaving consumers and customers a bit angry and in complete shock this past summer when Verizon dropped their two-year contract over night without ever informing the public or their customers of their decision.
The domino’s effect had started, this time with less surprise, it didn’t take long for other major carriers like Sprint and AT&T to also drop and stop offering their two-year contracts to new customers. Currently, Sprint still allows existing customers with two-year contacts to renew them when their contracts are up.
How to Buy a Phone and Pick a Plan in a Changing Industry
The reason carriers are dropping 2-year contract plans is because they claim no-contract plans offer more flexibility, although many customers have become upset about their instant decisions to eliminate the 2-year contract. Personally, I believe they’re giving the consumer less flexibility, before the customer could choose between a 2-year contract plan and a no-contract plan, now they’re limited to only one option.
The contract plans allowed existing customers to get a free phone or at least nice discount on a new phone when they upgraded their phone, for example, they could get a new $700 smartphone for only $200. The downfall to the contract plans was that you paid slightly more per month and if you decided to end your phone service before your contract was up, you were forced to pay an early termination fee, in which the fee amount was generally prorated based on how far you were into your contract.
The no-contract plans don’t give customers a discount on a new phone and are required to pay full-price for the phone. Although, cell-phones are expensive, and carriers realize that not everyone can afford to pay $700 upfront for a new smartphone, so most carriers have leasing or installment programs. You’re can qualify for this type of program as long as you have decent credit, which allows you to make monthly payments on your new phone over a two-year period until it’s paid off. In exchange for paying full-price for the phone, the price of your monthly service is slightly less than it would be with a two-year contract.
According to an article Victor Lickerson wrote on Time.com which stated, “Those free phones were never actually free”, referring back to the two-year contracts when you could get a free phone upgrade by renewing your contract for another two years. Although, his statement is true to some extent, with a two-year contract you paid slightly more per month for the actual plans service than you did with a no-contract plan. However, depending on the phone you could get free at the time of the upgrade, a two-year contract might have been a better deal, especially if you were getting $500 or $600 phone for free.
In the remainder of this article you’ll learn everything you need to know about buying a cell-phone and a choosing a carrier plan, and hopefully answer any questions or concerns you may have now that the cell-phone industry has changed.
Is a No-Contact Plan More Expensive?
It’s hard to say exactly, generally, in most situations over a two-year period, you would end up paying the same amount whether you had a two-year contract or a no-contract plan. Again, this isn’t always the situation, and you’ll have to do the math yourself to figure out which plan is cheaper. If you currently have a two-year contract, figure out what you pay per month for the service, then figure out the amount of money you save every two years when you upgrade on either a free phone or the discount you would get on the phone. Then go on your wireless carrier’s website to find how much their no-contract plan cost per month, plus the full retail price of the phone you want. Figure out how much each plan would cost you over two-years and compare them side-by-side.
On no-contract plans, after you’ve purchased a phone you can save money on your monthly plan rate by holding onto that phone and using it for as long as possible. The average life of a smartphone is around two-years, which is unfortunate considering how expensive they are. You can easily increase the life of your phone by getting a decent protective smartphone case and a screen protector. I don’t recommend buying phone accessories from your plan’s carrier as they significantly mark up the prices on their accessories and can find much better deals online. I know this because I worked for one of the major wireless carriers for a few months after college, and sales on cell-phone accessories accounted for a large part of their profit margins, after paying their store’s sales associates a 20%-50% commission on the accessories they sold.
Instead, you can save anywhere from 50% to 90% off the cost you would pay at your wireless provider for cell-phone accessories by purchasing them online at websites like CellularOutfitter.com, which has just about every kind of phone accessory you can think of, for every phone, at the lowest prices.
Important Note: Keep in mind, unlike two-year contracts where the monthly price of your service is locked in for two years, the price of no-contract plans can increase or decrease at any time.
Does Anyone Still Offer Two-Year Contracts?
No longer do any of the major wireless carriers offer two-year contracts to new customers and most no-longer offer them to existing customers either. AT&T was the last major wireless carrier to fully drop their two-year contract program at the end of this past December.
For existing customers, from what I understand Sprint is the only carrier that will allow their customers who currently have two-year contracts to renew them and still get a free or discounted phone. T-Mobile dropped their two-year contracts entirely years ago and only have no-contract plans. AT&T customers who currently have two-year contracts will be forced to switch to a no-contract plan whenever they decide to upgrade their phone.
What Wireless Plan Is Best For You?
Most of the plans offered by the major wireless carriers all have unlimited calling and texting, so when figuring out which plan is the best fit for you, begin by looking at what you use for data. You can find out how much data you currently use by either viewing your data usage on your wireless providers app or by going to their website and logging into your account.
Most people never use more than 1GB or 2GB of data, and you don’t want to pay for more data than you use as it can be expensive. It’s easy to reduce the amount of data you use by simply connecting your phone to a Wi-Fi network anytime you can.
If you ever go over your data usage it’s not the end of the world as overage fees generally cost less than what most people think. For example, on AT&T’s Mobile Share Value plan, it’ll cost you an extra $15 for each additional gigabyte of data you use. A nice benefit AT&T has is they allow you to roll over any data you didn’t use in the previous month to the next month. T-Mobile has a similar feature if you have a 6GB or 10GB data plan, you can carrier over unused data and accumulate it for up to 12 months.
What If Your Family Uses A Lot Of Data?
If your family uses a lot of data, consider getting a cellular plan that offers unlimited data to save money and a lot of headaches in the long-run. Both Sprint and T-Mobile’s standard plans will give you unlimited low-speed data if you happen to use up the entire amount of high-speed data that you signed up for with your wireless plan. These two carriers both also offer unlimited high-speed data plans as well.
T-Mobile Simple Choice plans that have a least 3GB of data included in the plan, now offer a cool new feature called Binge On, which allows you to watch and stream unlimited video content from Netflix, Hulu, ESPN, Amazon Video, HBO, Sling TV, Showtime, and many other streaming services, and the data usage won’t count against your high-speed data plan limit. T-Mobile will also allow you to stream music without using any data from your plan when you use Spotify, Pandora, Apple Music, and many other music streaming services.
Do You Have To Pay Full-Price On New Phones?
The short answer is yes, but you don’t have pay for it all at once if you don’t want to. All the major wireless providers have installment payment plans that allow you to make periodic payments on the phone over the course of a few years. Of course to qualify for the installment payment plan you need to have a decent credit history and credit score to be able to get the phone without a down-payment and be able to make interest-free payments on your new phone. When making payments on the phone, the phone is the only thing you’re committed to with the carrier and once the phone is paid off, you no-longer have any commitments to that carrier and the phone is yours.
Can You Use Your Own Smartphone At Any Wireless Carrier?
The answer to this question is, it depends. If you bought your phone through your current wireless carrier, it’s probably what’s called a “locked phone” which only makes it usable on that wireless providers network. Although, as long as your phone doesn’t have any ties or commitments to another phone carrier, meaning it’s fully paid off and isn’t currently locked in another plan, like a two-year contract, then most of the major wireless carriers will unlock your phone for free if you’re thinking about switching carriers and want to use your current phone.
Although, wireless carriers don’t like it when you switch to another carrier and try to make it as difficult for you as possible. One way they make it difficult is by locking all the phones they sell so that you can only use that phone on their network, but now since it’s fairly simple for anyone good with technology to “unlock smartphones“, major carriers awhile back began unlocking phones for free when customers decide to switch to their network.
Although, it’s not always as simple as just unlocking a phone, many carriers also tie the phones they sell to one of two special technology networks, these networks are referred to GSM and CDMA. T-Mobile and AT&T phones are generally tied to the GSM network, and Sprint’s phones are normally tied to CDMA. If you find a carrier you like that uses one of the same technology networks your phone has, it may still not perform correctly. Phones that use CDMA are usually more difficult to switch to another carrier, whereas phones that use GSM are generally easier to switch to another carrier. To be certain you’re able to switch carriers with your phone, you should always ask first.
Can You Buy A Phone That’s Compatible With Any Carrier?
Phone manufactures, like Motorola recently began selling unlocked phones that are compatible with all the major wireless carriers, but you have to purchase your phone directly from Motorola the manufacture. Motorola currently sells a couple of different popular smartphones on their website at Motorola.com which are fairly cheap, like their Moto E smartphone, currently only $120, and the Moto G smartphone, currently only $180.
How To Save Money When Purchasing A Smartphone
If you’re into the “latest and greatest” smartphone models on the market you’ll have a hard time finding any discounts or deals, if this is you, your best bet to get any kind of deal on a newly released model smartphone is on the internet through a third party seller.
If you don’t need to have the best and newest smartphone on the market, then it’s much easier to find a deal or discount. Previous generation smartphones, typically can be bought at a big discount from their newly released price, and are still great phones. For example, at AT&T, the latest generation iPhone 6s has a big price tag of $650, but the previous generation iPhone 6 model sells for only $550, and the generation model before that, the iPhone 5s sells for only $450.
You can save even more money by checking the wireless carrier’s website to see if they currently have any refurbished models, which are previously used phones. When buying a refurbished phone, be sure it comes with some kind of warranty, just in case it’s dysfunctional or has a problem. You also may be able to find a good deal on a phone at websites like eBay or Amazon.
Alternative Wireless Provider Options – The “Pay As You Go” Route
Going through a traditional wireless provider, like AT&T or Sprint, isn’t for everyone. Some people may have had bad experiences in the past with the major wireless providers, others don’t like the sale process or having to talk to a sales person that’s working on commission, and some people just don’t qualify for the service plans major wireless companies offer because they have bad credit. So, what are your other options? Fortunately, you have a couple of other affordable options, like “prepaid” and “pay as you go plans“.
Pay as you go and prepaid plans have been around for a while, but over the last couple years they’ve become much more popular and desirable, offering phone and service features that are similar to the services major wireless providers offer, except sometimes at more affordable prices, and customers can purchase these phones and plans in stores like Walmart or Target, and you never have to sign anything or talk to a sales person if they don’t want to.
Pay as you go service providers like Straight Talk give you many more options and let you purchase unlimited everything plans monthly (every 30-days), every three months, every six months, or you can even purchase a plan upfront for a full-year! They also offer an unlimited everything international plan for only $60 a month, which includes unlimited calling, text, and data. Prepaid and pay as you go phones and wireless services can be purchased online or in-store at major retailers like Target, Sam’s Club, or Walmart.
Straight Talk’s Plans Pricing (all plans can be refilled manually or automatically):
- All You Need plan (30-day plan) – $30: Includes 1500 national talk minutes, unlimited texting, and 100MB of data. You can double the amount of data you get for free by enrolling in their auto-refill program.
- 30-Day Unlimited Plan – $45: Includes unlimited talk, text, and data.
- 3-Month Unlimited Plan – $130: Includes unlimited talk, text, and data.
- 6-Month Unlimited Plan – $255: Includes unlimited talk, text, and data.
- 1-Year Unlimited Plan – $495: Includes unlimited talk, text, and data.