Just a few years ago, buying a cellphone without a contract was both unfashionable and largely unfeasible. No-contract options were available but getting your hands on the latest phones and the best data plans usually required a two-year contract.
But no-contract plans have been on the rise, especially since March, when T-Mobile abolished annual service contracts from its lineup. Now, the no-contract options are so plentiful and varied that you might want to consider one, especially if your current phone is outside the contract period.
There are two big questions to think about before making the switch. Can I save money? And, will I receive the same level of service? The answer to both can be yes, though it depends on your particular circumstances and on doing your research before making any move.
Making It Pay
In traditional two-year plans, carriers often use a practice called subsidizing. Knowing that you will be locked in, they lower the phone’s price to entice you to agree to a contract. They may, for example, offer an iPhone for $200 instead of the $600 or more that the device costs at full price. The carriers then earn a profit over time from whatever talk, text and data plan you have chosen. And if you decide to leave the plan early they can recoup at least some of the subsidy by collecting an early-termination fee.
But the no-contract universe is different. Typically, you pay full price for the phone, buying it outright and without a credit check, and the monthly bill for the service plan is usually less than those available with two-year contracts. That means there is a financial incentive to extend the life of your phone when you have a no-contract plan.
The Service
When it comes to service, many of the no-contract options are tailored to feel like conventional plans, with unlimited texts, for example. And some providers offer pay-as-you-go plans, where users pay for service in advance — like a certain amount of minutes — and buy refills as needed.
Because the options are so numerous, pay attention to the details. When considering a no-contract plan, study network coverage areas, data speeds, pricing and customer service reliability. If the carrier’s network does not cover the area where you live, work and travel, then strike that choice and move on. Many no-contract plans provide smaller coverage areas than standard contract plans on the same network.
Also, if you are going to spend a lot on the phone itself, research its network compatibility. Many new phones are compatible on multiple carriers, giving you more flexibility with providers. The underlying technology of a device that runs on AT&T’s network will most likely work on T-Mobile’s network, but not Sprint’s or Verizon’s.
The Major Carriers
T-Mobile was the first major carrier to do away with standard contracts, and the other carriers have started to offer no-contract plans of their own, either directly or through brands or subsidiaries. But perhaps the best way to see how a no-contract plan works is to compare a T-Mobile plan with a standard contract plan from another major carrier, like AT&T.
Say you want a plan with a new iPhone. On T-Mobile, the 16-gigabyte version of the new iPhone 5C is available on T-Mobile for $22 a month for 24 months, with nothing down — a total of $528.AT&T offers the same phone for $100 with a two-year contract.
T-Mobile users must then also pay for a monthly talk and data plan. T-Mobile’s monthly plans start at $50 for unlimited talk, unlimited text and 500 megabytes of high-speed data. Meanwhile, AT&T, with its subsidized phone, offers a contract plan for $70 with unlimited talk and text and 300 megabytes of data.
In this comparison, the extra $428 spent on the phone at T-Mobile is more than offset by savings of $480 over two years on the plan ($20 a month for 24 months). But you can start to pocket real savings after two years, when the phone is paid off.
Among the other options offered by the major carriers is Aio Wireless, a subsidiary of AT&T that opened in May and aims to simplify by offering just three plans. Each comes with unlimited talk, text and data. Unlike the plans from T-Mobile and others, though, the pricing includes taxes and fees.
The cheapest Aio plan is for basic phones, at $40 a month, with 250 megabytes of high-speed data, and smartphone plans start at $55, with two gigabytes of high-speed data. The purchase price of some phones can be spread over 12 months and the company uses AT&T’s network, though the coverage area is smaller than it is for AT&T’s contract plans.
Sprint offers no-contract offerings with its As You Go plans and through brands like Virgin Mobileand Boost Mobile. On Virgin, a $35-a-month plan, Beyond Talk, will get you 300 minutes of talk, unlimited text and data with a high-speed cap of 2.5 gigabytes. And although Virgin and Boost use Sprint’s network, the coverage areas are smaller than for Sprint’s contract customers.
Verizon, too, offers no-contract options. The Samsung Intensity III, a basic phone with a slide-out keyboard, was recently $65, and a plan with unlimited talk, text and basic data is $50 a month.
Other Options
Republic Wireless, a newer option, offers unlimited talk, text and data, all for $19 a month. But there is a catch: you are encouraged to use a Wi-Fi connection when available, even for phone calls. It’s a hybrid approach; when Wi-Fi is not available, your phone connects to Sprint’s network. The other catch is that there’s now only one phone offered, a $99 Motorola Defy XT, a smartphone customized to connect to Wi-Fi hot spots and to hand off calls to cellular when moving off.
Ting, like Republic, also offers service on Sprint’s network. New and refurbished phones are available; a refurbished LG Optimus S was recently $68, or you can activate used Sprint phones.Ting bills monthly for what you use, based on separate price tiers for talk, text and data. For example, if you use 500 minutes of talk, 100 text messages and 500 megabytes of data the total is $31 plus taxes and fees.
Other sources of no-contract plans include Cricket Wireless, which has a basic plan for $35 that includes unlimited talk, text and data on basic phones, and MetroPCS, which has a $40 smartphone plan (taxes and fees are included) with unlimited talk, text and 500 megabytes of high-speed data.
More basic no-contract options, called pay-as-you-go plans, are available at retailers like Walmart, Target and Best Buy. With these options, you buy a phone and then add services as needed. Many of the phones have basic features, with an emphasis on cost savings. Walmart offers basic phones through providers like TracFone, Net10 and Straight Talk. The Net10 Samsung S275G, a flip phone with a camera, is $19.88. A prepaid card with 300 minutes of talk and Web — or 600 text messages — is $29.88 for a 60-day period of service.
Breaking free from the shackles of the dreaded two-year contract has never been easier. Still, the fine print is required reading. By: Thomas J Fitzgerald
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