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T-Mobile Offers Cheap Service Plans for the iPhone 5

Updated

Last week T-Mobile finally put its money where its mouth is by announcing that it has scrapped smartphone contracts for good. T-Mobile simultaneously made another long-awaited announcement, declaring that it will not only offer the iPhone 5 starting April 12, but that it also has rolled out LTE coverage in select markets.

T-Mobile's "un-leashed" contract-free plans make it the first major U.S. carrier to offer the iPhone 5 with no annual service contract. This change has shifted the landscape of wireless service amongst the Big Four, separating T-Mobile from the pack. So, what's in store for customers who choose to take the seemingly budget-friendly and non-binding leap? Here's a look at the cost and caveats of signing up contract-free with T-Mobile.

Wireless Freedom and the iPhone 5 at a Lower Cost

Typically wireless carriers offer large subsidies for smartphones, which then tether customers to hefty 2-year contracts. T-Mobile, however, offers the opposite: a no-contract plan that customers can quit at any time — with some stipulations. Under its new business model, T-Mobile won't offer subsidies on smartphones: customers can either purchase devices at full cost, or pay an up-front fee and subsequent monthly payments until phones are fully paid for.

So, with the lease-like plan, a 16GB iPhone 5 costs $99.99 up-front. (Current iPhone 4 and 4S owners can trade-in their device and pay $0 down for the newest model). Customers then pay $20 a month for 24 months. (Yes, the payment plan spans two years; sound familiar?) However, according to CNET, the installment plan amounts to spending $579.99 on the iPhone 5, which is $69 less than the standard $649 retail value of an unlocked iPhone 5. And in fact, T-Mobile offers the phone for $579.99 if you pay in full at the time of checkout as well.

Additional savings can be found in the plans themselves, which are on the whole less expensive than those in the traditional subsidy model. T-Mobile subscribers receive unlimited voice, text, and data, and there are three tiered plans that allow the user to access varying amounts of data via 4G speeds; the $50 per month plan includes 500MB of 4G data, while $60 per month snags 2.5GB and $70 per month allows for unlimited 4G data. However, these monthly fees don't include the cost of financing (aka "monthly installments" towards the purchase price of your phone), which can range from as little as an extra $5 per month for, say, the T-Mobile Prism, to up to $20 a month for the aforementioned iPhone 5, Samsung Galaxy Note 2, and Samsung Galaxy S3. Essentially, the fancier the phone, the more it'll cost per month.

Having done away with annual contracts, T-Mobile customers can now make the decision to upgrade their devices whenever they please, although they will still need to pay off the original handset in full. To facilitate upgrades, T-Mobile allows its customers to trade-in any unwanted device and receive "market value" in exchange, thereby allowing customers to effectively put a down payment on a newer device. What's more, once customers pay off financed phones, their monthly bills will drop to its original service plan pricing. While this may seem like a no-brainer, it's an effective savings of up to $20 each month; AT&T, Verizon, and Sprint don't lower monthly fees after 2-year obligations are met.

No Contracts, But You Can't Just Jump Ship

A cornerstone in T-Mobile's contract-free model allows for its customers to leave whenever they'd like, although it's not as easy as just making a run for it. T-Mobile requires that financed phones be paid off before they can be unlocked. As such, T-Mobile's non-binding contract doesn't charge a termination fee, but insures that customers are charged the value of the device.

Another caveat in T-Mobile's non-contract agreement comes in the form of sharing data. According to CNET, subscribers can't share data across a family plan. Instead, each line has a 500MB limit per month. Additionally, while T-Mobile has indeed rolled out 4G LTE service, it's currently only available in seven markets — and that doesn't include the three largest metro areas in the U.S.

Despite these restrictions, T-Mobile's plans are cheaper alternatives to traditional contract-based offerings from Sprint, AT&T, and Verizon. According to the New York Times, going the T-Mobile route could save as much as $1,000 or as little as $360 over the span of two years, when compared to an AT&T plan.

Ultimately though, T-Mobile is generally perceived as trailing behind its competitors. While the carrier offers new and enticing incentives to lure customers, its reputation for less-than-pristine service still precedes it. However, if a consumer can overlook this, he or she stands to save a hefty sum. Readers, will any of you make the switch to T-Mobile's UnCarrier plan structure?

Front page photo credit: Laptop Magazine
Photo credits top to bottom:
Steve Jobs Is Dead and Lets Unlock iPhone


Contributing Writer

Summar Ghias is a writer and social worker. A former assistant editor at Budget Travel, Ghias has freelanced at Discover, People, In New York, Spinner.com, and AOL Travel among others.
Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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11 comments
upx42
I've been a happy T-Mobile customer for about 5 years... but under their Pay-As-You-Go (aka prepaid) plan. My effective cost per YEAR has been as low as $20 -- I don't use a lot of cell minutes because most of my calls are made and received with Google Chat and Google Voice (on Gmail via internet) for FREE !
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I've always Hated expensive contracts and locked phones (often with diminished capability), so I applaud T-Mobile for making a big step in the right direction -- and wish them so much success that the other carriers are forced to change.
dealnews-Emily
@thenerdrecht: You are right, the 2GB plan is actually 2.5GB. We have updated that. But as far as tethering goes, T-Mobile's plan details state that only the unlimited data plan includes up to 500MB of data for Smartphone Mobile HotSpot. The lesser data plans state that they include "Smartphone Mobile HotSpot for device tethering" with no mention of included data.
dealnews-Emily
@pmurray63: When we refer to 'the cost of financing' we solely are speaking of the additional monthly charge T-Mobile bills for a selected device after the initial downpayment. You can also call them "monthly installments charges" There is no other 'financing cost' in terms of interest charges. The only potential downside to paying for a new phone over two years is that it will be locked (and tethered to T-Mobile service) until it is paid off.
pmurray63
"However, these monthly fees don't include the cost of financing"
Um, isn't "financing cost" the fee or interest rate that someone charges?
As I understand it, there is no additional cost for buying the iPhone (not sure about the others) over time. If my choice is to pay $580 up front or spread it out over two years *with no additional cost*, it would be foolish not to take the latter option.
So if my understanding is correct, there are *no* "financing costs," only monthly installments toward the purchase price.
ump08
Take a look at Wal Mart's Straight Talk programs. Same phones, choose your carrier (AT&T, Verizon, T-Mobile), Same pay off options. $50/month unlimited talk, text, data?
thenerdrecht
i feel the need to correct a number of different things (from both the article and from the comments) for one the 4g data limit is not 500mb, 2gb, and unlimited it is actually 500mb, 2.5gb, and unlimited because each additional 2gb is $10 and can be added on to the original 500mb. Secondly, each plan includes up to 500 mb of tethering for free which was not mentioned (good luck getting that for free on any other plan)
in terms of the comments, dirvine, the phone is always 580 for the new no annual contract customers. the only time that the device will be 650 is if the device is purchased as a walk in customers with no current account. And mwf, you may want to do a bit of research before you speak. T-Mobile owns and operates tracfone (as well as gomobile, straightalk, family mobile, etc among others) meaning that their service is only operating off of a small number of existing T-Mobile towers so there service cannot be better. In any case, these plans are a game changer.
dirvine
If you buy the iPhone full price up front from tmobile its actually 650, only when you finance it is it 580. Apple is doing the same thing in their stores when the phone is financed for a tmobile plan. If you want to pay it off and get the 580 price, you have to pay the 99 down, pay one payment of $20, and then pay the rest off in a lump sum.
married2lori
I am a 7 year T-Mobile customer. As a former Starbucks store manager who had occasion to deal with Jim Alling (current T-Mobile COO). I can't think of anybody in Corporate America that I have more respect for, and my experiences with T-Mobile customer service has been totally in line with my knowledge of Mr. Alling.
We currently have 4 lines with 4 smartphones and data service and have been paying about $220/month which includes insurance and extended warranties on all 4 phones. When we asked about buying an iPhone for my wife, we were told that we couldn't on our current rate plan, and would need to pay $50. per line (since we have a year left on our contract) to migrate to the new rate plan. The new rate plan that we were "forced" to change to will save us about $50. per month after including the iPhone installment payment.
Of course, no contract means no contract. I suppose they could raise our rates whenever they feel like it. But, for now, we're very, very happy.
jwomack46
Actually you (the author) misread the data limits. There are no limits on data but the basic limit on 4G speed is 500 MB per line. For an additional $10 a month you get 2 GB or $20 for full 4G unlimited.
gkcmilner
I have been with T-Mobile off and on for a long time (Voicestream days) and the customer service is by FAR the best of any I have dealt with. So I must assume you mean data or voice service when you state "reputation for less-than-pristine service". It's T-Mobiles customer service and reasonable prices that have always brought me back.
MWFplus3
Even with this "new deal" from T-Mobile, the service issue mentioned at the end of the article will keep me away. The company is absolutely horrible from a customer service perspective....arrogant and downright rude. I had a VERY bad experience with them about a year ago and vowed never to go back, and I'm sticking to that. I'd rather just have a voice plan with a company like TracFone (great connectivity and service, BTW) than go back to T-Mobile.
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