Is a Smartphone Upgrade a Wise Choice?

The days of getting a new cell phone just for signing a two-year service agreement are long gone. Unless you can take advantage of a carrier promotion, you’ll likely pay full price for a new smartphone. With phone prices creeping higher and higher each year, owning a smartphone is pretty expensive, sometimes even more so than owning a laptop computer.

Carriers make it fairly easy to upgrade to a new phone, allowing you to pay in installments up to 30 months. You can even trade in your phone every few months if you’d like. The price of the phone is tacked onto your cell phone bill, which can mask the true impact of upgrading your phone. Before you trade in for the latest model, here’s what you should consider.

How much is the down payment?

You won’t be able to get a new phone without paying something out of pocket. You’ll pay an upfront down payment up to $300 and then you’ll be allowed to finance the remaining balance.

How much will your cell phone bill increase?

Your cell phone bill may increase as much as $50 each month, especially if you also pay for a cell phone protection plan. It may not seem like much, but it’s still a good idea to consult your current budget to make sure the increased cell phone bill won’t affect your finances.

Are you ever going to pay your phone off?

If you upgrade your phone every year or two and use an installment plan to pay for it, it’s almost like you’re just renting a phone. You’ll always be stuck with phone payments and never actually own a phone.

Are you going to stick with this carrier?

Two-year contracts have gone away, but unless you completely own your phone, you don’t have the freedom to go to another carrier whenever you want. You’re contractually obligated to pay for your phone in full and you can’t leave until you take care of that obligation. Some carriers will pay off your device if you switch (or at least reimburse you), buy they’ll require you to purchase a new device under your new plan.

Paying full price for new devices is the new normal, but you can still make the best of it. For example, you can pay for your device with a rewards credit card that offers a 0% introductory rate. You’ll have to pay off the device sooner depending on the length of the promotional period, but you’ll earn rewards on the purchase and own your device sooner than financing through your cell phone carrier.