How to Get a Smartphone for Cheap

We all want one. They look cool, we can watch Netflix on them, play games, and we have the access to the web wherever we go. So why doesn’t everyone have one? They cost an arm and a leg. And not just the phone. Families can easily spend over $250 a month on their plans.

Why are the Plans So Expensive?

I’m sure most of you have seen or heard ads about cheap or even free phones offered by carriers like AT&T, Sprint, T-Mobile, and Verizon. What’s the catch? Those darn 2 year contracts. They lock you in for a couple years paying over $100 (including taxes) for a single line!

Sprint’s lowest contract data plan costs $79.99 per month, but when you also factor in the $9.99 smartphone fee and 20% in taxes (standard for postpaid plans), you come out to about $106. Oh yeah, and the price of the phone. So just how much are you saving when you get that “free” phone? We’ll use the example of an iPhone 4S since they’re pretty standard. Sprint offers a pre-0wned 16 GB iPhone 4S for only $49.99 with a 2 year contract.


Now let’s calculate the cost of the iPhone over the course of 24 months with this formula:
Cost = (monthly payment * months) + phone + activation fee

Cost = ($106 * 24) + $50 + $36 = $2630

But there’s a better way.

As you can see, the discount in the phone price is pretty minimal when we consider how much it costs over the 2 years you’ll be using it. So what does a used iPhone 4S cost if you buy it outside of a contract? We’re going to need an unlocked iPhone 4S (don’t get “unlocked” confused with “jailbroken”, this is all legal) for this to work correctly. Here are some of the prices that the iPhone 4S recently sold for on eBay:

(Click to Expand)

We’ll take the average of the phone prices listed and say a used, unlocked iPhone 4S costs $375. So we’ve got the phone, now we just need a plan.

No Strings Attached

There are many benefits to having no commitments. When it comes to phone contracts, you have the freedom to switch carriers whenever you please and can avoid those hefty Early Termination Fees; but what’s really great about these monthly no-contract plans is that the phone isn’t subsidized by the plan, which means they won’t charge you nearly as much as they would with postpaid plans. I’ve hunted around for the best deals on prepaid plans and found that T-Mobile offers the most competitive prices. Here are their Monthly4G plans:

If you look in the middle there, you’ll notice a hidden gem: $30/month for 100 minutes, unlimited text, and unlimited web. As an added benefit to prepaid plans, they don’t fall victim to the same phone taxes that their contract-bound brethren do and they don’t require activation fees! So let’s do the math now:

Cost = (monthly payment * months) + phone + activation fee

Cost = ($30 * 24) + $375 + $0 = $1095

That can’t be right!

But it is. By paying the full price for the phone and going with a prepaid plan instead, you save over $1500 over the course of 2 years. That’s an average of $62.50 saved per month even considering the full price of the iPhone! Just imagine how much you’ll save over a lifetime.

Now if you really wanna get nitty gritty, you can forego the social status of an iPhone and go with an Android-operated phone of the same calibur for even cheaper. I bought a Samsung Galaxy Exhibit 4G brand new for $180. Right now, it comes with a $50 refill card that you can use to pay off your first 2 months on the $30 prepaid plan, which makes the full price of the phone effectively come out to $130.

But Nate, What About the Minutes???

Like you, I’m also apprehensive about having a 100 minute limit. That’s why I ported my number over to Google Voice for a small fee of $20. Basically how it works is like this: When someone calls my Google Voice number, it automatically forwards that call to my cellphone (which is on a different number) through an app called GrooVe IP. This ensures that my minutes don’t get used up. Instead, I use my unlimited 4G data plan or a Wi-Fi signal to make and receive calls. It gets better. If you have other Wi-Fi enabled devices like iPods, tablets, or laptops, you can use an app called FoxFi to make your phone a free hotspot for your other electronics.

For $30/month, you get unlimited minutes, unlimited texting, and unlimited data (throttled after 5 GB) with a hotspot.

If any of you out there are under contract, I highly encourage you to get out when you can. You’ll thank me later.

PS – for an extra discount, order refill cards for 2% off from Calling Mart to avoid paying sales tax.

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