The other day I went to the AT&T store with my parents to help them get a cheaper plan for their cell phones. I hadn’t realized how complicated phone billing options have become. AT&T now has four options when it comes phone and service plan combinations:
1. Buy a new phone with a two-year contract
This is the same option that’s always been available. The advantage with this plan is you generally get a huge discount on the purchase of the phone. The most obvious disadvantage is you’re locked into a contract for 2 years – no upgrading or changing service providers for a very long time. The hidden disadvantage with this plan is the discount you received on your phone is usually more than offsite by an additional 15-$20 tacked onto your service bill every month. Over the course of your two-year contract, this can add up to as much as $480. The phone company generally comes out ahead when you choose this plan.
2. Buy a new phone and pay zero down…but make monthly payments
This is a fairly new option that was just introduced within the past year. It’s similar to the two-year option, but you’re not locked into a long contract. After a year, the service provider allows you to upgrade to a new phone at no additional cost. Now, depending on how fancy you go with your new phone you may end up paying a higher monthly payment – you’re basically leasing a phone. The phone company still comes out ahead with this deal, but you do have the added ability to upgrade to the latest technology every year without forking over an early termination fee.
3. Buy a new unlocked phone
This is the most flexible of the four options. You go out and buy a new unlocked phone (meaning it’s not tied to a particular service company) and you pay a monthly service fee that’s 15-$25 cheaper than what you’d pay for options 1 or 2. The big advantage is you’re free to change service providers any time you want. And, if you pick the right phone, you can actually come out ahead of what it would otherwise cost to go with either of the first two plans. When my current two-year contract expires, I’m going with this option. Google sells a high-end phone called the Nexus 5 for $349.
4. Keep your existing phone beyond it’s original two-year contract
This is, by far, the cheapest option. Instead of upgrading to the latest and greatest technology, stick with the tried and true phone that’s gotten you through the last two years without any problems. Sure you miss out on Samsung’s latest Galaxy model with a heart-rate monitor and water resistant construction. But, if all you care about is making calls, texting and possibly downloading a few casual apps, there’s really no reason to pay for an upgrade. My parents went this route and saved themselves a decent chunk of change. They also were able to upgrade from a plan with limited voice minutes to a plan that includes unlimited talk and text. More minutes and a cheaper price – it’s a no-brainer.
These four options are not exclusive to AT&T. The other major carries offer similar deals. It might also be worth checking out some of the discount carriers such as Straight Talk which now lets you use the AT&T LTE network.