By the end of the year, three of the four major wireless carriers won’t offer contracts.
That would have been unthinkable just a few years ago, but the industry is going through a big shift. T-Mobile, Verizon, and soon Sprint only offer no-contract plans. AT&T has no-contract options, but it’s still the only major carrier that has contracts.
The carriers are making the right decision too. No-contract plans are better for the consumer, and could even save you some money. If your current contract is up or you’re about to sign up for new service, you should choose to go off contract.
1.) You know where your money is going
The real cost of a smartphone is actually way more than you pay up front when you sign a two-year contract. For example, contract plans let you get an iPhone 6 for $US200, even though the phone costs $US650. Your carrier ends up paying the difference to Apple, and you slowly pay the carrier back over time through your monthly bill.
But the cost of your phone is baked into the bill, so you’re paying more than you need to after two years if you keep your phone.
If you go off-contract, plans tend to be a little cheaper. You can pay the full price of your phone up front or sign up for a payment plan and pay it off a little at a time. Your bill may not look much different if you do a payment plan for your phone, but at least you know where your money is going. Plus, you’ll save money on your monthly bill after you’ve paid off your phone.
2.) You can get a new phone whenever you want
When you get a phone with a two-year contract, you’re usually not allowed to upgrade to a new device until your contract is up. If you don’t have a contract, you can get a new phone whenever you want as long as you’ve already paid off your current device. It’s good news for people who like to upgrade more often than their contract typically allows.
3.) You can switch carriers whenever you want
If you have a contract with your carrier, it can be tough to cancel your service and switch to another one. That’s because most carriers charge an early termination fee (ETF) if you back out of your contract early. Your ETF could be several hundred dollars if you’re relatively early in your contract.
With no-contract plans, you only pay month to month and can cancel and switch to another carrier if you’re unhappy with your service. The only caveat is that your carrier will ask you to pay off your phone first if you’re on a payment plan.
This also gives carriers a greater incentive to provide you with better service and customer support. They don’t want to lose you.
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