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Call 4 Action: Verizon Offers No-Contract Cell Phone Service

Contract-Free Cell Phone May Not Be Right For All Consumers

POSTED: 4:54 pm EDT September 23, 2008
UPDATED: 7:02 pm EDT September 23, 2008

There may be some relief for people who are fed up with long-term cell phone contracts.

One of the country's biggest wireless providers is announcing it will no longer require you to sign a one or-two-year agreement.

On the surface, it sounds like a great deal. But for some people, it could be a costly mistake.

This appears to be a new trend in the cell phone industry. In fact Verizon, which is launching its new month-to-month calling plan this week, is only the latest company to offer something similar.

You can still sign up for a plan with a contract, and some people may still want to choose that option.

Under government pressure over early termination fees, many cell phone carriers are now offering month-to-month service plans.

With no contract to break, there are no termination fees to worry about. It sounds like a good deal. But some industry experts, like Dan Shaffer of Wireless Solutions, say it's not for everyone.

"I would say the average person doesn't really benefit from it," Shaffer said.

Those who like fancy cell phones should brace themselves for some sticker shock.

With month-to-month service, consumers will pay full price for a new phone, not the discounted rate you get when you sign a contract.

For example, the world-edition BlackBerry is about $150 with a two-year-agreement. But without the contract it costs $520. The difference is $370, far more than the $175 early-termination fee consumers would pay to break a contract.

Another downside to no contract severs is that new month-to-month customers must pay a one-time, $35 activation fee.

"The benevolence can only go so far. They have to make some money somewhere," Shaffer said.

For some people no-contract plans may be worth it, especially if you don't mind having a basic, inexpensive phone or if someone gives you their old phone.

People already under contract will have to wait for the agreement to end before switching to month-to-month service. Otherwise, consumers will get hit with an early termination fee. But those fees decrease the further you are into your contract.


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