Paying more upfront can be a long-term money saver.
A handset that’s subsidized by a wireless provider is cheaper at the point of purchase. But by accepting the subsidy, you’re locked into the provider’s plan, normally for two years. More and more, however, it’s possible to pay full price for that same phone, in which there’s no discount via a provider subsidy, but there’s also no requirement to sign up for any particular plan.
The NY Times does the math for one phone:
Let’s say that you buy a MyTouch 3G, one of T-Mobile’s most popular smartphones, for $400, and sign up for its unlimited voice, text and data plan for $60 a month. The total cost of the phone over two years would be $1,840.
If, instead, you buy the phone subsidized by T-Mobile for $150, that same unlimited plan will cost $80 monthly — which is still the best deal among the major carriers, by the way — bringing your two-year total to $2,070.
If you reject the subsidy, you’ll actually have $230 to spend two years from now, and $20 every month you keep the phone beyond that.
Just a reminder to take into account the true long-term costs of a cell phone before you make a purchase or sign up for any plan.