This month, T-Mobile announced it would be changing its business model. They’re becoming totally contract-free, with a simple low rate for talk, text and web.
The new rates are by far the lowest of the big four US carriers (Verizon, ATT, Sprint). For $70 per month, you get unlimited data, voice and messaging – no strings attached.
Sounds great right?
Actually, there is a big trade off to leave the contracts. Without a fixed term, the carriers can’t subsidize the cost of your phone. This is an arrangement we’re now all comfortable with. This is what makes the latest and greatest devices relatively affordable at renewal time.
And… smartphones are not cheap. T-Mobile’s new 32GB Apple iPhone 5 retails for $679.99 before taxes, a number much harder to stomach than $199.
If you can’t pay all upfront, there still is an option to split it up. T-Mobile will allow you to put some money down toward the phone of your choice, however, now you explicitly pay a monthly fee for the phone.
In the case of the iPhone 5, you would pay $199 upfront and make monthly payments of $20 per month for 24 months, resulting in the total cost of the $679.99. Not exactly sure how you can walk away from your plan if you’re half way through paying for a phone, but that is another story.
Freedom from your contract will cost you about $240 more for your phone and service over the 2 years.
Knowing this, I’d gladly lock in to a contract for 2 years and even pay the premium for unlimited.
I was planning on renewing with T-Mobile in May for the new Samsung Galaxy S4 but this has me rethinking the idea.
Share your thoughts in the comments about the tradeoff between being locked into a contract and being responsible for the cost of devices
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on June 1, 2014