Verizon Cuts Contracts and Subsidies: What You Need to Know

The way you buy your smartphone is about to change. iPhones were previously discounted to $199 by carriers in return for a two-year, locked-in contract. In actuality, that phone costs $649. For Verizon Wireless customers, that discount is going away.

Verizon Wireless announced on Friday that it will end its subsidy program, starting August 13. With AT&T likely to follow (T-Mobile has already made the switch), customers will now be responsible for paying the full retail value of the device.

Here’s what you need to know:

Say Goodbye to Free and Discounted iPhones

In past years, using a Verizon smartphone subsidy would lock customers into a two-year plan. With contracts disappearing, Verizon will no longer give customers a “free” or “discounted” iPhone, meaning you need to pay full retail value (starting at $649).

Previously, the cost difference for the subsidy was absorbed in monthly service charges. With these charges gone, the announcement likely brings cheaper service plans, however, Verizon customers will need to pay full price for their device, either upfront or through monthly installments.

Choose Your Own Contract

Verizon will offer no contracts, allowing customers to be flexible and switch between their plans each month. All plans come with unlimited voice and text messages, and four different buckets of data plans (see below.) Verizon will also charge an “access” fee of $20 per smartphone per month.

Data Options:

  • Small: $30/month for 1GB of shareable data
  • Medium: $45/month for 3GB of shareable data
  • Large: $60/month for 6GB of shareable data
  • X-Large: $80/month for 12GB of shareable data
    Source: Verizon Wireless

Breaking It Will Cost You Exponentially More

A low monthly fee for your smartphone may seem like a compelling offer, but it could present grave consequences. If you choose a monthly payment plan, you’ll lock yourself into a financing plan until the phone is paid off or until Verizon lets you upgrade. If you break or lose the device, you’re still responsible for those monthly payments plus the cost of a new device – which can get expensive quickly.

What do you think about Verizon’s announcement?

Photo courtesy of The Next Web.

UPDATED: Article updated to correct cheaper service plans, rather than monthly plans.

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