You sell your cell phone soul to Sprint, or Verizon, or AT&T and in turn they give you a phone for a great price or even free. In return you agree to purchase monthly services for usually two years. You can’t switch providers without paying huge fees and you are required to shell over a hefty sum each month. That sounds a lot like the same type of prison that debt offers. It robs you of choices and puts the company in control, not you.
If you still don’t think that sounds enough like debt, let’s take a closer look at the iPhone 3GS which was recently all over the news. Many iPhone fans recently purchased an ‘old’ iPhone 3G for $199 and signed a 2-year contract. They now want to upgrade to the shiny new phone and AT&T told them to pound sand. They can wait until a year into their contract and then purchase the new 3G S for $400 not the $199 that new customers are paying.
The truth of the situation is that cell phone companies fork over fancy new phones for a cheap price, but you have to sign up for a two year contract so they can make up the lost cost. Don’t believe me, try buying an iPhone or the Palm Pre type phone without a contract. They are hundreds of dollars more.
Basically, the cell providers are floating you a loan which is paid off after two years when they have recouped their money and much more. The scary part is that a lot of people don’t even realize that they are entering a debt type relationship with cell phone companies and are really confused when things go bad.
Let’s run the math.
iPhone power user total cost
$200 phone + 24 months of $150 service = $3800(before taxes and fees)
Palm Pre power user total cost
$200 + 24 months of $100 service = $2600(before taxes and fees)
That is a lot of money people pay for a $400 dollar loan so that you could by the phone for $200 dollars instead of full price. Like I said, cell phone contracts are debt.
There are other options. Buy an iPod Touch for $229 and go for a pre-paid phone plan($80 a year) for a total of $389 for two years. Yep, I just saved myself well over two grand and stayed out of debt.
What do you think? Are cell phone contracts debt?