The Cell Phone Companies Are Ripping You Off
Do you own a Smartphone? Are you in a contract with Verizon, AT&T or Sprint?
Odds are you're being ripped off. Or have been ripped off in the past.
There's a game they play with contracts and subsidizing phones. Here's how it works:
Let's say you walk into Verizon, AT&T or Sprint and want a new Smartphone. For this example we'll choose the iPhone since it's a very popular device right now.
The iPhone 6 is 'only' $199 with a 2-year contract right? Wrong.
An iPhone 6 is actually $649. That's how much AT&T, Verizon and Sprint pay for it. $649.00
So Verizon, AT&T and Sprint charge you the $199 up front, plus tax, make you enter into a new 2-year agreement and let you leave the store with your new iPhone.
Now they begin to charge you additional each month to cover the actual cost of that iPhone. They don't tell you this, it's just part of the agreement. You won't see this itemized on your bill either, it's just part of your bill. (It runs about $27 per month.)
So each month, around $27 of your bill goes towards paying off that new iPhone. If you have several Smartphones on your plan, then of course you just multiply the $27 by that amount. Each and every month, for the 2-year contract.
So far, so good. Nothing completely unfair about any of this at this point. You decided to purchase a new $649 iPhone, they only charged you $199 up front. However, they actually paid $649 (or around there) for your new iPhone and they want their additional $450 back from you. They're going to charge you additional each month to get that money back. Again, that's fair.
It's fair until your 2-year agreement is finished.
And this is where you get ripped off. Once your 2-year agreement ends they continue to charge you the same amount each month. Your phone is completely 'paid off', they've recovered all of that $450 and then some, but they don't reduce the amount of your bill. You keep paying, they keep lining their pockets. Each and every month.
So let's say you bought a new Smartphone 3 years ago. The first 2 years you were charged extra to pay off that phone, but in the third year you were just giving Verizon, AT&T and Sprint extra money each month for absolutely no reason. They make a ton of profit this way.
$27 per month, for 12 months, $324! That's how much extra money you gave them in just 1 year, for nothing.
Let's say you have 4 Smartphones on your family plan. Remember, after 2 years they are 'paid off'. So let's assume you keep those same Smartphones for an additional year after your service agreement expires.
$27 x 4 Smartphones x 12 Months = $1,296.00!
So what to do?
You have a few options here:
- You can always be sure to purchase a new Smartphone once your 2-year contract has completed, and sell your current used Smartphone on eBay, Swappa.com, to friends, etc. (You do own these phones after all.)
- Choose a pre-paid plan from one of the major carriers, these don't require contracts and you pay full-price for your Smartphone up front. The only downside to this is that you usually can't get the latest and greatest Smartphones this way.
- Do business with T-Mobile. They break out the cost of your new Smartphone into monthly payments, and when your phone is paid off your bill is REDUCED. As it should be.
One more important note: Avoid these new Smartphone 'early upgrade' programs being offered by the major carriers. They double-dip from you each month. Remember, you are already paying for your new Smartphone each month, and then they turn around and charge you AGAIN with promises of new Smartphones sooner. Complete ripoff.
Verizon Edge (AVOID)
AT&T Next (AVOID)