Why You Should Get a Free Cell Phone
September 29, 2009 by John
Major wireless carriers are giving out free cell phones these days.Sometimes, a $600 brand new phone will cost you nothing upfront. How are they able to do that? What’s the catch? Like cable and satellite TV companies who would love you to commit a long term service contract, cell phones such as Verizon Wireless phones are often subsidized by carriers so that you can pay substantially less than the actual cost. What the wireless companies are hoping is that you will spend more money on the voice and data services during the next 24 months.
Should you get a free cell phone and lock yourself up with the same carrier for 24 months? Let’s give you a little example. BlackBerry Storm from Verizon Wireless costs $600 without 2-year commitment. You can buy this phone today for $600 at any retail store. But what good is a phone without service? The Storm is designed to take advantage of today’s fast wireless network so that you can check emails, download music, and browse the web faster.
Scenario 1: Let’s say you decide to go with Verizon on a month by month basis. Keep in mind that the monthly service fee is not different from what the 2-year contract customers are paying each month. At anytime a no contract customer can cancel the service without incurring Early Termination Fee of $175. By the end of the 12 month you no long want to be with Verizon. Simply call Verizon Wireless to cancel the service. Total cost of owning the phone for 12 month: $600 + $70×12 = $1440
Scenario 2: Free phone, why not? So you sign a 2 year contract and get a free Blackberry Storm. At the end of the 12th month, you decide to switch to another carrier. No problem. Pay $175? No. It will only be $115 since Verizon has the prorated Early Termination Fee policy – for every month into the contract, your ETF will be deducted by $5. So the total cost for owning the phone for 12 months will be: $0 + $70×12 + $115 = $955. The saving vs. no contract is $485.
OK, maybe you don’t have the patience to hold on to the same phone for 12 months. Let’s do 6 months then. Cost for 6 months with no contract is $600 + $70×6 = $1020 while cost for 6 months with a contract is $0 + $70×6 + $145 = $565. The saving is still great at $455!
You get the idea now. Stop paying the retail price and get a free phone today!