Early Upgrade Plans – What Your Wireless Company Doesn’t Want You To Know

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 Not to be stuck with an out of date phone, getting 1/4 the battery life of when it was new, just counting the days until our contract was up so we could upgrade?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.

straight-talk-versus-verizon

 

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!

Be Smart

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 :)

 

 

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8 Responses to Early Upgrade Plans – What Your Wireless Company Doesn’t Want You To Know

  1. Evan says:

    I was shocked when I first saw these plans and read the fine print. We, as Americans, are so used to baking things into our monthly plan that is my suspicion that these plans are going to kill it for the phone companies!

    Do you get to keep the phone when you upgrade? that could really help out the cost when you sell it online for more than the 2 yr price, right?

    • You only get to keep the phone if you’ve had it for the 2 years or have paid the full retail price. So that’s another disadvantage to the early trade in, you don’t get to keep/sell your phone to defray some of the upgrade costs.

  2. I’ve actually heard a lot about Straight Talk. I think cell phones are such a rip off. I am Canadian and our plans are even more expensive!

  3. Robert Cormier says:

    I don’t think this is an issue with the phone company so much as it is with the mindset of, as you put it, “keeping up with the Joneses.” While I agree that upgrading to a new cell phone every six months is irresponsible (and ridiculous), it appears that the plan Verizon is offering isn’t a rip off at all (if I understand it correctly).

    The problem with the table is that it assumes a person buying one phone over the course of a two year contract. But obviously, the early upgrade plan is for people who will buy multiple phones over the course of the contract. So, a more accurate table would include the cost of purchasing new phones. Assuming a cost of $650 for a new phone and an upgrade every six months the Early Upgrade Plan saves a person over $300 every six months.

    I haven’t done the math (I would be curious to see it), but looking at the table as-is, the Early Upgrade Plan is probably cheaper than a regular phone plan when purchasing multiple phones, and not much more expensive (but still notably more expensive) than a Straight Talk Plan.

    Again, I think it’s ridiculous to buy a new phone every six months, but if someone wanted to do that, the Early Upgrade Plan seems like a good deal relative to a regular phone plan.

    • If you’re on the typical Verizon/AT&T plan if you upgrade early you have to pay the full price of the new phone, but you get to keep the “old” phone and can sell it on your own to defray some of the costs. With the early upgrade plan, to upgrade at 6 months you have to have paid off 50% of your old phone, and you don’t get to keep that old phone unless you’ve paid the whole thing off.

      I haven’t done the math on upgrading that frequently with a typical plan, but I think the ability to sell your old phone after 6 months might give the typical 2 yr plan the advantage even though you’d pay full price up front for your new phone.

      Either way, you’re just lighting money on fire by upgrading that early/often.

  4. Nick says:

    Yeah, the early upgrade plans make my stomach ache. So many friends and family have mentioned it to me as “how great is that – now we don’t have to wait.” It’s amazing how much marketing can influence behavior.

    • It really is crazy. Especially since the differences between phones these days is pretty minimal. It’s not like you’re missing out on any super great new features by not having the newest phone out there.

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