Cell phone contracts
How it all begins…
How many times have you heard the phrase, “Yeah, I just got the free phone when I signed up with Big Wireless Company.”? And how many times has that phrase been followed up 12 months later with boat-load of curse words because one of a couple of things happen:
- Your phone breaks and you have to spend $200 on the same phone you got for free.
- You have to go on eBay and grab a cheap phone that still has the breath-stank from the previous owner on it.
- The phone’s battery dies in about 20 minutes and your cell phone company says, “Sorry bub!”
- The screen shows 4 bars, but calls go straight to voicemail 75% of the time.
How did we get to this point?
So why is this free phone costing so much money? Well, you had a couple of options, but you may not have known that at the time.
One option is pre-paid: you pay up-front for a phone, you buy a fixed number of minutes, then when they are gone, you have to buy more. If you decide you don’t want to use that service any more, you can walk away. An example of this service is Tracfone.
This phone is $9.99. Is it a good phone? Probably not. What features does it have? Not a whole lot. Certainly no custom ringtones, internet access, or anything along those lines. Fortunately, it will make phone calls.
The drawbacks, of course, are that you have to monitor your minutes so you don’t run out and your phone doesn’t do a whole lot.
If you were to go to a post-paid service, you might look at the cheapest phone they have, such as this:
This phone has internet, bluetooth, custom ringtones — all the goodies. Unfortunately, those goodies are going to cost you $140 more than the little Tracfone. That is a decent amount of money to come up with at the drop of a hat. There’s got to be another way.
The other way!
In order to compete with the likes of Tracfone, your post-paid wireless company wants to give you your phone with a healthy discount. But as mom always said, there is no such thing as a free lunch. More than likely, that lunch is subsidized by your wireless carrier and if you decide you want to leave lunch early, you need to pay him back.
By making a promise to stick with your carrier through thick and thin, they offer you a nice discount on your phone to woo you in the door.
Generally, this works out for both of you because you can get that sweet new iPhone 3GS for $200 instead of $500 and your carrier knows that even if another carrier comes out with the jPhone 4HT (which is way more awesome), you are going to give them some stability with the $70 each month you promised. If you change your mind and can’t live with out the jPhone 4HT, you get to pay an early termination fee (aka ETF).
Early Termination Fees are a way for the carrier to recover some of the loss of money if you decide you don’t want to stick around and take your phone with you. In the past (prior to about a year ago), ETFs were flat. That meant if you canceled a month in or 18 months in, you paid $200. Most (all?) carriers now pro-rate their fees so they go down from $200 to $50 incrementally.
Bottomline
So what do you do? There are a couple of options:
- Get prepaid – Not all prepaid is a $10 Tracfone with no features. T-Mobile has a pre-paid option called FlexPay that allows you to pay full price for a phone with all the bells and whistles. While this could get expensive, it may be worth it for you. The plan includes internet and voice minutes. You are required to pay for the month in advance, but otherwise the cost is the same as their regular contract plans sans discounts on the phone. Other carriers offer similar plans.
- Get postpaid – This is your typical plan and gives you the discount on the phone. To take full advantage of this, you should put the extra money saved into savings or buy the insurance. That way you have a fallback plan in case things don’t work out like you were hoping.
The final decision must be yours, but be sure to consider that the next two years of your life will be owned by the carrier that you choose. If you are ok with your choice, by all means, sign on the dotted line.
If you think you might not be cut out for contracts or you just want more information on what is contained in your contract, you can head to The Digitante homepage and use the contact link to contact me by email or you can give me a call. I would be happy to discuss your options for living a contract and/or worry free cordless life.
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