T-Mobile has made a bold step by getting rid of two-year contracts. It’s actually not quite that simple – especially if you want an inexpensive phone – but there are savings to be found nonetheless. Here’s the skinny.
The plans are affordable, considering what you get. Fifty bucks a month will get you unlimited minutes, unlimited text messages and 500 megabytes of data. Ten bucks more gets you an additional two gigabytes of data; ten bucks more than that gets you unlimited data. Family plans start at $80 per month for two phones and top out at $210 per month for five lines and unlimited data.
All plans include unlimited text messages and the ability to use your phone as a data hotspot for your other devices, which are nice perks. Such features can cost extra on competing networks.
There are no data overages, but there’s a catch. Let’s say you opt for the $50-per-month plan to try to save some money, but you blow through your 500-megabyte data allotment. You won’t be charged extra and your data won’t be turned off, but it will be slowed down to almost unusable speeds. Remember dial-up? How slow everything was? We’re talking speeds close to dial-up.
Of course, connecting your phone to your home or office Wi-Fi connection will keep your data speeds nice and fast. Only the data connection to T-Mobile gets slowed down; you should connect your phone to Wi-Fi whenever possible as a general rule of thumb, since it doesn’t use your T-Mobile data allotment.
There are no two-year contracts, but there’s a catch. Your smartphone that cost you $200? It actually costs a lot more than that, but you paid $200 for it in exchange for a two-year contract with Verizon or AT&T or Sprint or whichever company you’re with. So how can T-Mobile continue to offer cheap phones when there are no two-year contracts anymore?
One way is by letting you pay full-price for a phone. Samsung’s Galaxy Note II costs $680 that way. That’s the most expensive one; some are far cheaper. The other option is to get the phone at a discount, but pay up to $20 per month for two years as an equipment fee. In this scenario, the Galaxy Note II costs $200, plus $20 per month for two years.
So that $50-per-month personal plan all of a sudden costs $70 per month and you’ve agreed to a two-year contract of sorts.
You can use the iPhone, but there’s a catch. AT&T and T-Mobile use similar cellular technology, making it possible to use AT&T phones on the T-Mobile network and vice versa. If you pay full price for a T-Mobile phone (as in the previous scenario) and you decide you don’t like T-Mobile, you can jump ship and use it on AT&T.
Likewise, if you have an AT&T phone, such as the iPhone, and you’ve paid full price for it or fulfilled your two-year contract with AT&T, you can use it on the T-Mobile network instead. This quip from the fine print on T-Mobile’s Bring Your Own Device page is important, however:
T-Mobile does not sell the iPhone. Verizon and Sprint iPhones will not work on our network; other iPhones may have limited functionality, including coverage limitations. Capable device required for 4G speeds; the iPhone is not currently 4G capable on our network.
T-Mobile uses a different flavor of 4G data than AT&T uses for the iPhone, so your 4G LTE iPhone 5 would download apps and surf the web considerably slower. T-Mobile is readying its own 4G LTE network, however, so the word “currently” in that above quip might very well mean something someday.
Run the numbers to see if paying full price for a phone makes sense. Using the $680 Samsung Galaxy Note II as an example, over the course of two years on the $50-per-month plan, you’d spend $1,880. If you were to pay $200 for the phone, plus $20 in equipment fees for two years, the total cost with the $50-per-month plan would also be $1,880.
If you’re the type of person who uses a phone for at least two years before buying a new one, the installment plan could make sense here. If you don’t like two-year contracts or you want to upgrade to a new phone every year (sell the old one on eBay or Craigslist or use one of the many trade-in sites), paying full-price up-front could make sense. It’ll make your monthly costs cheaper, too.