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of Upgrading Your Smart Phone
Calculating the Real Cost of Upgrading Your Smart Phone

Calculating the Real Cost
of Upgrading Your Smart Phone

0

We’re witnessing all out war between major cell phone carriers. They’re in a constant battle to outdo each other with better coverage, faster speeds, cheaper rates, and even offering incentives to customers to switch to their service.

It’s not only a fight between major carriers, but smaller ones too. The big players also have to contend with smaller providers who use the buzz term, “no contract” to entice customers to switch.

Now everyone is offering no-contract service, but is it really much different than the traditional 2-year deal?

Let’s look at the details and find out.

Our family uses AT&T as a provider, and switched from a traditional plan with a 2-year contract to their no-contract service earlier this year. We previously paid for a data plan plus $40 for each of our four lines. When we made the switch, that per line fee dropped to $15 each saving us a total of $100 a month.

We thought we had found the mystical unicorn of saving money, until my wife decided she wanted to upgrade her phone.

With the iPhone 6 newly released, you’re likely on the hunt to upgrade your mobile phone and plan, too. These are the two most popular options available:

 

Traditional 2-year Contract

  • Get a new phone at the discounted price of $400, when signing a new contract.
  • This will increase your per-month phone line fee from $15 to $40 for the duration of the contract.

Total cost to upgrade with AT&T: $400 + $600 ($25 increase in line fee x 24 months) = $1,000 extra paid out over the length of the entire contract.

That is absolutely outrageous! So unless you want to stick with your old phone, and data plan, you may want to consider other options.

 

AT&T Next Plan

  • Nothing to pay down on the phone right now.
  • Line fee stays the same, but you’ll have a $36 payment per month in additional to the regular bill.

Total phone price: $36 x 24 months = $864 extra paid over the next 2 years. Not much better than the option above, but it’s still somewhat good savings.

 

Always Compare Plans and Prices

The marketing of the AT&T next plan did leave me with a bad impression. It’s touted as a no-contract plan, however, you make monthly installment payments on your phone until it’s paid off. Which coincidentally is two years, and sounds like a contract to me.

They boast that you can drop AT&T as a carrier at any time, but you’d have to pay the entire balance owed on your phone. Which sounds quite a bit like a cancellation fee.

However, that being said, the overall price paid for the phone is $136 cheaper by making the installment payments through the AT&T Next Plan.

This is a look at just one type of cell phone with one carrier, but it lays the blueprint for how you would go about calculating the best path when you’re in the market for a phone upgrade.

With carriers offering multiple plan options, things get confusing quickly. But, it’s important to take the time to calculate the true cost of all your options.

Have you upgraded your phone recently? Did you calculate which plan would be the least expensive overall? What are your findings?

 

David Ning on Email
David Ning
David Ning
This article was written by David Ning and originally appeared on moneyning.com. Moneyning.com is a personal finance blog where insights are shared on how to carefully save money, invest for the future, and live frugally and happily – because it’s the little things that matter in achieving financial freedom.

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