Photo (cc) by yoshimov
The best things in life are free — but unfortunately, that doesn’t include expensive but necessary items like cellphones.
While tech enthusiasts have no trouble putting down hundreds of dollars at once for a new device, it’s not always that simple for families and individuals watching their budgets, which is why offers of “free” smartphones make an attractive alternative.
However, it’s no surprise that when a carrier offers something for nothing, there’s usually a catch. Here’s a look at the fine print and truth behind “free” and subsidized cellphones and plans.
Free cellphone plans
As you’ll soon see, “free” cellphones are rarely free. But there are still ways to nab free calls, texts and data from your wireless plan. Several U.S. providers are now offering free phone plans to eligible customers. These plans include a set number of voice minutes, text messages and megabytes each month, all free of charge.
The MoneyTalksNews cell plan comparison page allows you to compare plans in seconds. Use it!
There are two important things you need to know before going down this path:
- Free phone plan providers do want you spend some money with them, so you need to understand that you will never get a 100 percent perfect and 100 percent full quality product with a free plan — there will always be a “gotcha.”
- The free plan packages either require you to bring an eligible phone or purchase a phone from the provider.
FreedomPop’s “freemium” service is contract-free and includes a $0 basic plan with 200 free voice minutes, 500 free texts and 500MB of free data each month, which you can get here. You can also download the company’s Free Talk and Text app to make cost-free voice calls to any U.S. number, and to any other FreedomPop app user worldwide. You’ll get free worldwide texting and 100 minutes of free international calls.
However, it’s likely you’ll need to buy a cheap phone from FreedomPop as part of the process of getting a free service plan. Additionally, the voice quality on FreedomPop’s Free Plan is non-premium, with voice calls transmitted via VOIP on the data network, so call quality is not as good as a standard cellphone call.
RingPlus also offers limited-time free plans, which are sponsored by ringback tone advertising. Currently, you can pick from the Truly Free 2 Plan, (15MB of data, 50 messages and 125 voice minutes); the Pepper Plan (with 250 minutes of calls, 500 texts and 10MB data); or the Michelangelo Plan (with 500MB of data, 1,000 voice minutes and 1,000 messages). Some of these plans require customers to have an account balance of $5 or $10 to qualify, however, and will automatically top-up that balance when you exceed your free inclusions — so check the fine print before signing up.
More information on free plans from FreedomPop and RingPlus can be found in our guide here. There are also many cellphone plans that are pay-per-use and provide a reliably low monthly bill; you can compare these options here.
You’ve probably come across zero-dollar phone options before – for example, sign up for a two-year service plan with a carrier, and get a brand new phone for $0 upfront and no more to pay. This was the old model of wireless subsidization.
No monthly repayments, no money down, just take out a contract plan and that new device is yours. These deals usually include a fixed monthly payment for your total package which includes your data, talk and text, plus a “line access fee” for each phone you connect to your plan.
The catch is that this access fee is often inflated for customers who buy phones on a two-year plan, meaning that although you’re not paying a separate monthly charge for your phone, its cost is still built-in to your plan price.
Overall, you’re likely to pay around the same amount (or more) for your plan in a two-year period, as you would for the same plan and phone if you were buying a device on installments over 24 months.
In short, cellphones on contract are never really free: There’s a cost for the phone in the monthly plan charge, you just can’t see it in your bill.
Free phones via installments, early upgrades and leasing
The new trend in the market is for installment plans and leasing, meaning new cellphones are advertised as $0 down. The way that this works is to separate the phone from the plan, so that the plan is no-contract. Your payments for the phone are shown as the full retail price of the phone, divided by equal payments over an agreed period (usually 24 months). The payments are interest-free, and customers with a good credit history will pay $0 down when signing on to these plans.
As an example, if a phone is $480, the carrier will divide the payments into 24 months: This means that you will pay $20/month for 24 months to pay off the phone. The line fees on your plan will usually then be reduced, to reflect that you’re actually paying for your device separately.
In short, installment plans spread the cost of the phone over 24 months, but you’re still paying full price for it.
Buy one, get one ‘free’
Occasionally, carriers will run a variation of the “buy one, get one free” offer to encourage customers to pick up two expensive new devices. However, it’s rarely as simple as buying one handset, and taking home a second free of charge and with no more to pay.
A great example of how these promotions work is AT&T’s current two-for-one iPhone deal. If you buy the iPhone 6s on AT&T’s Next 24 early upgrade plan, you’re eligible to get second 6s (valued at $650) free. The catch? You’ll need to add a second line of service to your plan, and you’ll be paying off both iPhones for the next 30 months.
You’ll only qualify for your “free” phone if you add a new line to your account — so if you didn’t already want to expand your cell plan, you’re now paying a minimum of $45 per month extra, for a new data plan and line access fee.
Your zero-dollar iPhone will still cost you $21.67 per month at first, until AT&T’s reimbursement bill credits kick in — which can take up to three months. And if you decide to cancel your plan before the 30-month Next 24 agreement ends, you’ll be required to pay the full balance owed for your phone. In addition, customers who upgrade at 24 months on Next 24 will miss out on the remaining six bill credits for their “free” iPhone, and will be required to hand their iPhone back to AT&T in order to upgrade.
Overall, even though it’s technically a “free” iPhone once all your bill credits are applied, you’re still out money for your second line of service, as well as any taxes or surcharges. AT&T has also extended this offer to selected Android phones, including the Samsung Galaxy S6, but again, you’ll need to add a new line of service and buy both phones on AT&T Next 24.
Sales tax and surprise fees
Regardless of your credit score, you’ll also be paying the required sales tax at purchase, and, if you’re activating the device on a new account or line of service, you may be asked to shell out an “activation” or “upgrade” fee (usually in the range of $30-$40 per device).
These fees apparently cover the costs of either switching on a new phone line, or exchanging your old phone for a new one. If you decide to return your device within the initial exchange period, you may also be asked to pay another “restocking” fee to put your unused phone back on the shelf (again, usually between $30-$40).
- Installments / Early Upgrades will require the payment of taxes for the full price of the phone as you are purchasing the phone and paying it off slowly.
- Leasing, you don’t need to pay the full tax on the phone as you are not owning the phone.
- If you want to switch providers, you will need to pay out the remaining installments on the phone or return your leased phone.
Free government cellphones: Yes, they exist
Yes, completely free cellphones are available — but only to customers who qualify for the Lifeline Assistance program. Depending on your personal circumstances and the state you reside in, you may be able to access a free cellphone and up to 250 of free talk minutes to use every month.
The Lifeline Program is designed for low-income Americans who may not be able to afford a cell connection otherwise. Guidelines for eligibility vary between states and participating wireless providers, but usually applicants must have a total household income at or below 100 to 150 percent of the Federal Poverty Guidelines. If this applies to you, more information on this program is available here.
Have you used a free cellphone plan? Tell us about it in the comments below or on our Facebook page.
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