As sure as the sun will rise tomorrow, your cell phone provider will find new ways to squeeze more money out of you. The most recent plan they’ve devised to separate you from your money is the “early upgrade plan”.
These plans (offered by T-Mobile, AT&T, Sprint and Verizon) allow users to upgrade to a new phone before their typical two-year contract is up. It sounds like everything we’ve ever wanted, right? Not to be stuck with an out of date phone, getting 1/4 the battery life of when it was new, just counting the days until our contract was up so we could upgrade?
As you can imagine, a convenience like this will cost you. I’ll go so far as to call these early upgrade plans a gigantic rip off that you should steer clear of at all costs. I can’t imagine why anyone in their right mind would need a new phone every 6 months in the first place, but I digress. Let’s look at how exactly they’re trying to screw you over this time.
How It Works
I’m using Verizon as an example, but all 4 plans work in a similar fashion.
With Verizon’s early upgrade plan the full cost of your phone is divided into 24 installments, and you can upgrade your phone after 6 months if you pay 50% of your phones full retail price.
Late last year I wrote about my experience switching from Verizon to Straight Talk wireless. In that article I outlined how wireless providers subsidize your phones by baking the cost into the price of your contract (This is how you get an iPhone for $199). With the early upgrade plans your wireless company is betting that you’re ignorant to this fact. Or maybe they don’t even care if you realize it and just hope you’re too memorized by shiny new phones. Either way, the early upgrade plans are designed to sucker you in to not only paying the normal subsidized price of the phone that’s built into your contract, but the full retail price of the phone on top!
Here is the simple math on how your options stack up.
There’s really just no contest. Not only is the early upgrade plan the worst of the three options. Over a two-year contract you’d pay $453 more than a typical Verizon plan, and $1348 more than Straight Talk Wireless. $1348!
The numbers look even worse for the early upgrade plan if you actually want to upgrade every 6 months because you can’t upgrade until you’ve paid 50% of the retail cost of the phone. So have fun making that extra $163 payment for the privilege of upgrading at the 6 month mark. I should also point out that you can knock your monthly cost of the Straight Talk plan down to around $40 if you pay for 6 or 12 months at a time, therefore giving you even greater savings. By my quick calculation, upgrading your phone every 6 months on the early upgrade plan will cost you $2000 more than keeping a phone for the full 2 years on a Straight Talk plan. That’s insanity! They should let us taser people who even think of doing that!
Anyone who’s ever read a personal finance article can tell you that trying to keep up with the Joneses and flaunt “wealth” through flashy cars, phones etc… is a sure way to prevent yourself from ever actually accumulating real wealth. Still, it’s a habit that’s hard for anyone to resist. The cell phone companies know this, and they’ve taken it to the extreme with these new plans.
Is anyone actually impressed anymore when they see someone with the latest phone instead of one that’s been out for a year? Maybe it happened when the iPhone first came out, but that was a long time ago. I doubt I could even tell the difference between an iPhone 5 and a five-year old iPhone 3G unless I were to actually hold it in my hands and use it myself.
Don’t be so superficial that you think upgrading your phone every 6 months is earning you points with anyone. If I was out at a bar and overheard someone talking about that I would have a real hard time not laughing at them, but I would offer to buy them a beer…and I’d still have $1,995 left over from what I saved by being smarter about my cell phone service.
Readers: Did you know how big a rip-off the “upgrade when you want” plans actually were? Do you know anyone who has actually signed up for one?
You can read about my decision to switch to Straight Talk wireless in the link towards the beginning of this post. One year later, I can sit here and honestly tell you it was one of the smartest moves I’ve made in regards to my budget. I’m getting the same quality of coverage I was getting with Verizon and my real world savings is half of what I was paying before!
If you’re interested in making the switch to Straight Talk, check out the banner below & be sure to thank me in the comments after you start saving 🙂