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New Telecom Trend – Smartphone Upgrade Plans That Cost a Fortune

Recently, T-Mobile launched its JUMP system that offers early smartphone upgrades to customers. The plan costs $10 per month and allows for two upgrades every year.

Not to be outdone, AT&T (T) is launching a similar program called AT&T Next next week that will put customers on a 20-month installment plan that allows for a new smartphone or tablet once every 12 months with no down payment.

Sounds great, right? But in essence, these are just installment plans and far from free upgrades. In the long run you may not be better off opting for these “cheap” upgrades because it will save you more to actually pay more up front.

It’s only a matter of time before Verizon (VZ) and Sprint (S) follow suit here, so consumers need to be aware of what’s going on.

For starters, these are upgrade plans – meaning you have to have a device to sign up. For instance, purchasing an Apple (AAPL) iPhone 5 on T-Mobile costs users about $150 out of pocket up front and then $21 for 24 months on top of that. Then you’re adding $10 a month for the JUMP upgrade on top of that plan. That’s roughly $522 in the first year, pretty darn close to the $650 retail price for an iPhone, unlocked and contract free, from Apple.com!

Yes, you get the option to trade in for an iPhone 5S or iPhone 6 or whatever comes out – and you get to upgrade sooner. But you forfeit the resale value when you return your old phone to T-Mobile or AT&T. And on the open market right now you can easily get over $150 for a gently used iPhone 4S and almost $200 for an iPhone 5.

There are plusses, of course. Some people simply don’t have the budget flexibility and could use the financing option these payment plans provide. Also, T-Mobile’s program can also work as phone insurance.

But don’t get duped into thinking T-Mobile JUMP or AT&T Next are anything other than pricey installment plans that charge you a premium for deferring a big lump-sum payment up front.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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Comments
  • S J

    So does T-Mobiles Jump program actually mean Jump ship to someone else?…You guys are getting seriously ripped off in the US.