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Beware Of New Cellphone Upgrade Plans

5:56 PM, Aug 6, 2013   |    comments
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Undated -- With phones, computers, all technology - there is always something better and faster on the way. And cellphone companies are making it easier and easier to upgrade. First T-Mobile introduced a new plan. Now AT&T and Verizon have joined the party.

But many critics call most of these plans "rip-offs". Here's why:

Carriers charge high monthly rates for service because they typically subsidize the cost of the phones. Let's say you pay $200 for a brand new Galaxy S4. It really costs around $650 if you buy it outright. So you pay an inflated monthly fee for a minimum of two years in order to make up for those initial "savings".

With new early upgrade plans, AT&T and Verizon charge the full unsubsidized price for your phone. Then they still charge the monthly service rate designed to make up for the subsidy-- which you aren't getting. In other words, you're paying for your phone twice.

Then, if you want a new phone, you can get one anytime after six months. You have to pay off 50 percent of the full retail price. Then you can choose a new phone and start all over.

T-Mobile's Simple Choice plans are different. You pay the full unsubsidized price of a phone -- spread out over two years. But the monthly service charges are lower since T-Mobile doesn't do traditional contracts and doesn't use monthly fees to re-coup subsidies.

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