smart spending

Upgrade your phone? Not if you want to save money

"The unsubsidized plans usually include a discount on your monthly payments. These discounts can shave up to $25 a month from your bill. So in the long term, you'll actually pay less with the unsubsidized phone," Ramirez says.

When you buy your phone outright, you also have the freedom to switch to a cheaper carrier, potentially making your total cost even lower.

Scenario 3: Getting a new phone with a cheaper carrier

Cellphone carriers are changing their business models, namely because there's a lot of competition. Consumers are starting to realize that lesser-known services are often equally worthwhile.

Republic Wireless, for example, offers a $25 monthly plan that includes unlimited talk, text and data. Unfortunately, there are really only 2 phones you can use with the carrier, so fancy iPhone upgrades aren't an option. If you buy Republic's Moto G phone at $129, here's what your numbers will look like over time (minus taxes and fees):

Major carrier vs. specialized carrier

Upfront price of phoneMonthly billTotal 2-year costTotal 4-year cost
AT&T (full price, no contract)Upfront price of phone: $649.99Monthly bill: $45Total 2-year cost: $1,729Total 4-year cost: $2,809
Republic WirelessUpfront price of phone: $129Monthly bill: $40Total 2-year cost: $1,089Total 4-year cost: $2,049
DifferenceUpfront price of phone:Monthly bill:Total 2-year cost:$640Total 4-year cost:$760

You'll save hundreds of dollars per year (at least) over upgrading on a large carrier. That's assuming you use a full 2 GB of data every month. If not, Republic will issue a refund for the unused data.

Then, there are more conventional discount providers like Straight Talk, which is operated by TracFone Wireless. It charges a flat fee of $45 a month for unlimited talk, text and data (although data is throttled after 2.5 GB).

While shelling out the cash to buy a brand-new shiny iPhone on Straight Talk (or most late-model smartphones) can be tough, you're likely to save money over the long term compared with a major carrier -- if you can cut your data consumption.

Major carrier vs. discount carrier, new phone

Upfront price of phoneMonthly billTotal 2-year costTotal 4-year cost
AT&T (full price, no contract)Upfront price of phone: $649Monthly bill: $45Total 2-year cost: $1,729Total 4-year cost: $2,809
Straight TalkUpfront price of phone: $649Monthly bill: $30 (with 100 MB of data)Total 2-year cost: $1,369Total 4-year cost: $2,089
DifferenceUpfront price of phone:Monthly bill:Total 2-year cost:$360Total 4-year cost:$720

Although not as cheap as Republic, your total costs are still significantly less than with mainstream carriers, especially if you bring your own phone.

Scenario 4: Taking your old phone to a discount carrier

If you're able to unlock your current major-carrier phone and take it over for free to a discount carrier like Straight Talk, H2O Wireless or Ultra Mobile, you can save a substantial amount of money.

Ramirez cites another discount carrier, Virgin Mobile, as an example of how much is potentially at stake.

"You're looking at $35 a month on Virgin versus $80 a month on Verizon (considering a similar prepaid plan)," Ramirez says. "On a yearly basis, you're looking at savings of at least $540. Over a span of 2 years (which is the length of the average phone contract), you'll save $1,080 by choosing a discount carrier like Virgin Mobile."

Overall, it's clear the longer you can hold out for that new phone, the better. Especially once you have a totally paid-off, unlocked phone in your hands, there is a huge range of carriers and plans that can save you big bucks over the long haul.

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