How Much Does a FREE Phone Really Cost?

T-Mobile was advertising free smart phones last week. On Friday and Saturday only, new customers and existing customers eligible for an upgrade could get a brand new smart phone free when they signwd a two-year contract. I’ve been a T-Mobile customer for at least a decade, and I became eligible for an upgrade last month. The offer intrigued me. I tried taking advantage of it online, but it was only available in stores. I dragged my family to a T-Mobile store on Saturday and quickly realized that free comes at a cost.

The “free” phones required the most expensive data plan T-Mobile offers. That is not the data plan I have. The “free” phones also came with an $18 upgrade fee. And, the “free” phones cost $200 up front. You get that money back in a few months when you complete a mail-in rebate. None of this was disclosed in the advertising, which explains why customers were spending so much time checking out. I left after I did the math and figured out my “free” smart phone was going to cost me about $380.

I’m not saying they weren’t offering a good deal. It wasn’t a good deal for me, and I knew that because I did my homework ahead of time. I already knew I could get the smart phone I wanted for $99 online without increasing my monthly data plan or cost. I also knew I could upgrade for free online, but I was willing to pay a small upgrade fee in exchange for a free phone. I’m not willing to spend nearly $400.

Most cellular providers offer free or deeply discounted phones with conditions attached. Before you decide to switch plans or switch providers altogether, ask yourself, or them, these questions:

• Is there a contract required, how long is the contract and what happens if you cancel your service before your contract ends?
• How much more money will your plan cost you every month? Multiply that number by the number of months in your contract to realize the full cost.
• Do you need the services they are requiring you to sign up for? If not, what would your cost be if you just paid for the services you will actually use?
• Is there a rebate involved and what are the conditions? (Be really specific here. I once lost a rebate on this very issue.) 
• How much would the phone cost if you just bought it outright?

Do your homework before you settle on a cell phone provider or plan. A small amount of research could save you hundreds of dollars.