AH Primetime: Paying for Your Next Carrier Smartphone, Explained

In the United States, carriers play a huge role in how wireless customers not only get service, but also how they pay for the device(s) they get service on.  With the future of the U.S. wireless market looking to be close to rid of contracts very soon, the way we buy smartphones continues to change with the times.  And while carriers (sometimes) try to make the options easily visible and understandable, the methods of paying for a new smartphone can still be muddled by salespeople or the explanation itself.  We've got you covered here, so here's what you've got as payment options on the four major U.S. wireless carriers, in no particular order.

First, we'll be looking only at the payment plans for the device hardware itself, not the payment for service.  So, there are your first options.  First, there's two-year subsidies.  these are the older type of deals where you get a (sometimes) markedly discounted price upfront for the device, and a slightly higher monthly bill for service to 'pay off the subsidy'.  The result is that you own the phone after the contract, but, if you don't change plans, you'll still pay the higher price as if you're still paying the subsidy.

Next is the relatively new option of monthly payments.  You can pay typically $0 upfront, but, with each subsequent month's bill, you'll pay for service as well as a portion of the device's full retail cost.  These month-by-month payment options come in 24-, 18-, and 12-month durations, depending on carrier.  And some of the carriers even offer the device for a percentage of the full price upfront, with a lowered month-to-month cost as a result.

Next is the obvious option, especially if you're still grandfathered into one of the no-longer-existent unlimited data plans from certain carriers.  Buying the device outright is the most expensive option to take in a single sitting.  You'll pay the full, unsubsidized price of the hardware, and own the device right then.  Then your service bill per month will only be for service, instead of portions of the hardware.  This option is great if you have the money upfront and want to not be tied down in case you need or want to travel and leave the carrier.

And lastly is a rather odd option, and it's leasing.  This is the only option that doesn't actually have you owning the device at all, even at the end of the leasing period.  You'll pay for monthly service, as well a slightly lower (as compared to the monthly installment plan) price for the hardware.  This option is good if you want the latest phone, but don't want to have to try to sell it next time you upgrade.  Otherwise, you'll probably want to own the device when the paying is done, especially if you pay quite a bit for the best phone, then don't end up being able to walk away with permanently.  With the options explained, let's get to what you can expect from each of the Big Four.

First up is the biggest in the country, Verizon.  Big red has a history of being the most expensive, with the service and network quality 'making the price(s) worth it', but that's a very subjective topic, so that's for customer to decide for themselves.  The options Verizon has for typical phones (Non-prepaid, that is) is full price upfront purchasing or doing a monthly installment plan.  It's good to see Verizon kill off the contract, even though their devices are historically hard to use on any other carrier (if they work at all).  For the monthly payment option, the only duration is the typical 24-month period, so it's essentially like a contract, but possibly worse if choose to cancel service (which causes the rest of the device's payments to be due at once, sometimes totalling more than the old early-termination fee of around $350).  Not bad options, admittedly.

AT&T wins for sheer amount of choice in paying for a device.  They've got the upfront purchase, as well as monthly payments and the antiquated two-year contract.  The contract is hopefully dying out, because it's not a good deal anymore, as discussed earlier.  The upfront purchase is alright as an option, except that AT&T happens to charge more for the same handset than other carriers, so keep that in mind if you prefer this option.  Then is the monthly plan, and this is where AT&T shines.  There's the typical 24-month payment period, but there's also, if you prefer a quicker turnaround and don't mind a higher per-month device cost, an 18-month payment option.  But wait, if you are the type to both need the latest phone and be able to afford a yearly upgrade, there's a 12-month plan, so you can easily upgrade yearly to stay up-to-date in the hardware department.  And obviously, it'll be the highest per month device expense, but you'll own the contract and owe AT&T nothing after only a year, and you'll have a relatively recent device to resell if that's how you roll.

Next, let's tackle T-Mobile.  Big magenta is the pioneer of no-contract payment plans, with their Un-carrier events and the forward-minded CEO John Legere seemingly leading the way for the U.S. mobile market.  T-Mobile has essentially the same options as Verizon, and that's just fine.  You'll be able to buy the latest phone upfront, and use it internationally with ease, or you can opt for the monthly payments on the device, and that's straightforward enough.  Also, devices tend to cost as much upfront on T-Mobile as they do on Verizon and Sprint, while being more versatile, and not being locked to CDMA carriers / technology.

Lastly, we come to the oddball carrier, Sprint.  No other carrier has the number of options, or the simplicity (or lack of depth, depending) in choosing a plan to pay for your new device.  Sprint has four options, and they're mostly pretty good.  The full upfront purchase is here, as with the other carriers, and the devices seem to sit usually higher than T-Mobile but lower than AT&T in cost, though they're often locked to Sprint and always limited to CDMA carriers (with the exception of the Nexus 5 and 6).  Then there's the two-year contract, which, again, is just a bad deal.  And oftentimes, you'll pay more over the two years than you would for the device on a monthly payment plan.  Their monthly payment plan is also a good deal, especially given that most, if not all, of their devices are eligible for the elusive unlimited everything plan.  Last comes the reason Sprint is odd compared to other carriers: leasing.  Now, as discussed earlier, leasing a phone is just like leasing anything else: you don't own it at any point in the payment cycle, and the owner (Sprint in this case) reclaims the product when the leasing period is over.  Benefits are that you pay less than you would to finance it or pay outright, but the disadvantage comes in that you won't physically have a device to use or bring to another carrier after the lease period.  For some that's fine and maybe even ideal, but some might consider that a nightmare.

What's to be gathered from the current state of wireless carriers in the U.S.?  The biggest point is that you do have choices, and a fair range of them at that.  The other point is that you'll end up paying for the device in full once you're done with your carrier, unless you lease from Sprint, so you'll likely have a phone to use in a pinch or trade in for a discount on a new one.  The future of the U.S. wireless market looks to improve further with Sprint's removal of the two-year contract, and that looks to usher in a new way of owning and paying for devices that finally benefits the customer instead of the carrier.

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About the Author

Phil Bourget

Staff Writer
Using Android since 2012 and the Galaxy S III, I'm now running a Nexus 5 paired to a Moto 360 to keep updated on the Internet of stuff. Usually found on Google+ or in class.