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Thursday, August 21st, 2014


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Why “Free” Cellphones Aren’t Actually Free

Cellphones have hidden costs.The iPhone 4, the latest and hottest gadget to hit the markets, carries an astonishingly low up-front price tag. On AT&T’s website or in its stores, bright orange letters blare out the bargain – only $199 for the pinnacle of Steve Jobs’ engineering and design.

But as with all things, there’s no free lunch – and there are no real free phones, either. In the tech industry, products like the $299 Xbox 360 and $199 iPhone 4 are called loss-leaders. The company will lose money up front on the hardware, then make it all back on the software and services.

With an iPhone, you must sign up for a two-year deal to get the $199 price. The cheapest data package, at $15/month, is far too small to handle typical iPhone traffic, so you have to upgrade to at least $25/month, then add in a minimum of $40/month in minutes and $5/month in texts, for a total of $70/month – before taxes and fees. Over a 24-month period, you will shell out $720 extra on top of the most basic phone minutes plan for the privilege of using your $199 phone.

T-Mobile takes a different approach. Two-year contract plans – the ones which net you free or discount phones – always cost $10/month more than the regular ones. That’s at least $240 for the life of the contract.

Either way, watch out for hidden costs – and budget accordingly. Once in the contract, it costs a lot to get out.ADNFCR-3389-ID-19872637-ADNFCR

This entry was posted in Budgeting, Cell Phones, Shopping, Shopping Tips, Tech Trends, Technology and tagged , , , , , . Bookmark the permalink.

One Response to Why “Free” Cellphones Aren’t Actually Free

  1. max says:

    but can’t i buy the iphone and decode it so that i can use some prepaid network? if i do wat happns to the contract?

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