Make us your home page
Instagram

Do the math before getting a cellphone upgrading plan

iStockphoto.com

iStockphoto.com

Chicago Tribune

Smart consumers know that when a sales pitch involves convoluted math, chances are it's not a good deal. That alone is a warning sign against early upgrade plans being sold by the four major mobile phone carriers during the past year.

But not so fast.

While many reviews are lukewarm on the value of early upgrade plans for people who prefer the latest handsets, the plans can be a good deal for the opposite people they're aimed at: customers who hold on to their phones a long time, experts say.

As if it wasn't hard enough understanding pricing of cellphone plans, starting a year ago, T-Mobile, Verizon, AT&T and Sprint began rolling out early upgrade cellphone plans aimed at gadget lovers who could get their hands on the newest smartphone annually or even sooner.

Under traditional plans, customers had to wait about two years before they were eligible for a new phone at a discounted price. That's where the convoluted math has always started — with how most U.S. carriers charge their customers. Instead of charging for the phone and service separately, they bake into wireless service plans part of the price of the phones.

That's why savvy consumers know it's generally a bad idea to buy and hold a phone for more than two years if you're on a traditional plan.

You might as well upgrade when you're eligible. Otherwise, you'll continue to pay a monthly service rate that includes a phone subsidy for a device that has long been paid off.

That changed with early upgrade plans, which essentially separate the cost of the phone — allowing you to pay it off in installments over time, interest free — while reducing your monthly service plan price because you didn't pay an artificially low price for the phone.

So, ignore the names of the "upgrade" plans but don't ignore the plans, said Michael Gikas, of Consumer Reports. "The early upgrade plans are a great way to save money if you don't upgrade,'' he said. "Do exactly what they don't want you to do, and you'll save."

Logan Abbott, of wireless phone comparison site Wirefly, sees it the same way: Upgrade plans are good deals for people who don't upgrade frequently. That's especially true for customers on no-contract plans such as the AT&T Mobile Share Value plan. "If you're going with a no-contract plan, I would definitely do it," Abbott said. "The reason people didn't use no-contract plans is they had to buy the phone upfront for, like, $700. The early upgrade plan has kind of eliminated that."

Here are a few key points to consider as you think about switching plans.

• Smartphones are really good. "There's less reason to upgrade early than ever before," Gikas said. That's because smartphones have matured, and most of them are already very good, with few significant missing features. They will satisfy most people for about three years, Gikas said.

The plateau in phone improvements means it's easier to jump off the upgrade treadmill, keeping one for a long time without it feeling obsolete.

• Interest-free financing. Most early upgrade plans require you to pay the full retail price of the phone, but break it into monthly installments, amounting to zero percent interest on the full price of a phone. For example, the cost of a $650 iPhone 5s might be divided into 24 payments of about $27 per month.

"That alone makes it a good deal," Gikas said.

Plan price actually decreases. Previously, it didn't matter whether you bought a discounted phone or paid for it in full upfront — your monthly service bill would have been the same. With early upgrade plans, when you're done paying off the phone, your bill decreases by the amount of your monthly phone installment. But you continue to pay less per month than if you were on a traditional two-year contract plan.

"You're locked into a good rate with the phone already paid off," Abbott said.

What if you're a rapid upgrader? Ironically, early upgrade plans might provide the least value to frequent upgraders, although they offer convenience, experts say.

For example, you're required to turn in your phone, preventing any of the hassle of selling it yourself. For the rapid upgrader, losing out on that money from selling your late-model phone, often for hundreds of dollars, can wipe out savings from the early upgrade plan.







Names of early upgrade plans for four major carriers:

>T-Mobile: Jump Plan

>Verizon Wireless: Edge

>AT&T Mobility: Next

> Sprint: Easy Pay

Do the math before getting a cellphone upgrading plan

08/08/14 [Last modified: Friday, August 8, 2014 7:34pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Tribune News Service.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Despite Hurricane Irma, Hillsborough remains on pace to unlock hotel tax that could pay for Rays ballpark

    Tourism

    TAMPA — Despite the threat of a catastrophic storm, it was business as usual at many Hillsborough County hotels in the days before Hurricane Irma bore down on the Tampa Bay region.

    The Grand Hyatt near TIA closed during Hurricane Irma, but many other Hillsborough hotels were open and saw an influx.
  2. New Graham-Cassidy health care plan stumbles under opposition from governors

    Nation

    WASHINGTON — The suddenly resurgent Republican effort to undo the Affordable Care Act was dealt a blow on Tuesday when a bipartisan group of governors came out against a proposal gaining steam in the Senate.

    Sen. Lindsey Graham, R-S.C., joined by, from left, Sen. Roy Blunt, R-Mo., Majority Whip John Cornyn, R-Texas, Sen. John Barrasso, R-Wyo., Sen. Bill Cassidy, R-La., Senate Majority Leader Mitch McConnell, R-Ky., and Sen. John Thune, R-S.D., speaks to reporters as he pushes a last-ditch effort to uproot former President Barack Obama's health care law, at the Capitol in Washington, Tuesday, Sept. 19, 2017. To win, 50 of the 52 GOP senators must back it -- a margin they failed to reach when the chamber rejected the effort in July. [/J. Scott Applewhite | Associated Press]
  3. Early estimates peg Hurricane Irma damage at as much as $65B

    Banking

    The damage totals from Hurricane Irma are still being tallied, but early numbers are in: As of Tuesday, the storm is estimated to have caused between $42.5 billion and $65 billion of damage. That's according to a Tuesday release by Irvine, Calif.-based analytics company CoreLogic.

    Hurricane Irma is estimated to have caused up to $65 billion in damage, said analytics company CoreLogic. Pictured is 
Hermilo Munoz Castillo as wades down a flooded street to check on his home in southern Collier County, Fla. after Hurricane Irma passed. | [LOREN ELLIOTT | Times]
  4. Port Tampa Bay makes public/private commitment for $60 million expansion project

    Business

    TAMPA — Port Tampa Bay approved a public-private partnership agreement with four other entities to divvy up who will pay for a $60 million widening and extension of the Big Bend Channel.

    Port Tampa Bay approved a participation agreement with the U.S. Army Corps of Engineers, Florida Department of Transportation, Tampa Electric Company and Mosaic Company at the port's monthly board meeting on  Tuesday. Port Tampa Bay President & CEO Paul Anderson signs the agreement as Ram Kancharla; Port Tampa Bay's vice president of planning & development, Brandon Burch; project manager at United States Army Corps of Engineers, Lois Moore; of Alcalde and Fay and Charles Klug; Port Tampa Bay principal counsel, and Tim Murphy; deputy district engineer of the Army Corps., looks on. [Company handout]
  5. One of St. Petersburg's newest condo projects is sold out

    Real Estate

    ST. PETERSBURG — Reflecting the continued demand for condos in downtown St. Petersburg, The Salvador, completed earlier this year at 199 Dali Blvd., has sold out. Records show that a 2-bedroom, 2-bath unit sold Friday for $620,000 in an all-cash deal. Two other units — a 3-bedroom, 2-bath penthouse and a …

     Reflecting the continued demand for condos in downtown St. Petersburg, The Salvador, completed earlier this year at 199 Dali Blvd., has sold out. 
[Rendering courtesy of aalliiggnn LLC]