Like most people, I wait until my contract expires to get a new phone so I can take advantage of my carrier's contract subsidies. So far I haven't run into any problems, but I'm wondering if there are any advantages to paying full price for my next phone and going contract-free?Sincerely,
Phone FreedomDear P.F.,
Depending on your situation, cellphone contracts can add a bit of complication to your life or they can make no difference at all. Paying full price for your phone, however, puts you in a better situation to negotiate with your carrier—or any carrier, for that matter.
Obviously, when you don't "sign" a contract with a cellular provider you can leave whenever you choose. You have freedom to do whatever you want, essentially, without incurring any fees in the process. On top of that, you get a few other benefits because you will end up purchasing an unlocked phone (or a phone your carrier will unlock for you upon request). This means when you travel you can just swap in another SIM card without your phone having a hissy fit. When you have a locked phone, you're required to roam while abroad (if you even get reception) and pay the associated high costs. If you leave your country of origin with any regularity, you want to have an unlocked phone in your pocket.While the upfront cost of an off-contract, unlocked phone can feel a little daunting, know you'll make a good portion of that money back when you sell the phone and buy a new one. While paying full price will always cost you more, even with the money you make back when selling, if you replace your phone on a regular basis (i.e. approximately ever year) you can keep your losses low. For advice on selling your phone (or any other gadget, for that matter), consult our guide.You can always negotiate with your cellular provider. When they don't have you tied down by a contract with an early termination fee looming over your head, you have nothing to lose by leaving at any time. If you want a discount, you can call up your carrier and just ask for one. Let them know your plan costs too much, you found something cheaper elsewhere, and feel like you have to leave but you'll stay if they can offer you some sort of discount. Sometimes this works and sometimes it doesn't, so you may need to call back and talk to a few different representatives.Some service providers also have a special department of "retention specialists" (the name varies by company) that you can speak to if you want to cancel. These workers can provide you with a deal. When you call to ask about canceling your service, the company may transfer you to that department after a quick discussion with a standard customer representative.Contracts don't screw you over at every turn, and a $325 early termination fee (ETF) seems worse than the reality. ETFs shrink throughout the term of your contract until they don't exist at all. If you stay on contract for a year, decide you want to leave, and just pay the minimized fee, you can have most of the off-contract benefits described above without the need to pay full price for your phone. If you don't travel abroad much or at all, you might prefer to stay on contract because you can always escape when you need to. Let's take a look at the math.A 16GB iPhone costs $200 subsidized and $649 unlocked. AT&T charges a $325 ETF and Verizon charges $350. Both carriers allow you to cancel without penalty in the first month and subtract $10 for each full month of service you complete. So, in reality, AT&T charges $315 and Verizon $340. Let's use Verizon as the example because they charge more. If you cancelled service after the first month, you'd pay a maximum of $540 for your 16GB iPhone. That's $109 less than if you purchased it unlocked and that gap grows by $10 every month you stick with your contract. That means you ought to stick to your contract for as long as possible and pay the ETF if you want your freedom before the two-year period ends. While carriers don't necessarily have to unlock your phone after you've cancelled your contract early, off-contract and unlocked phones tend to go for about the same amount of money when resold so it really doesn't matter unless you need to unlock for traveling abroad.Not all phones cost $649 minimum nor have quite the resale value of an iPhone. Before you sign a contract, ensure that paying the ETF won't actually cost you more than buying an unlocked phone at the start. If not, sticking to your contract can be more cost-effective and you should consider it if you don't plan to travel out of the country or switch carriers and/or phones anytime soon.Love,LifehackerHave a question or suggestion for a future Ask Lifehacker? Send it to tips+asklh@lifehacker.com.Title image remixed from an original by Kae Deezign (Shutterstock). Photos by Victor1558 and Jack Dorsey.
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