Lawrence Martinez My piece of the Internet pie

Pay-As-You-Go vs Cellphone Contract for an Apple iPhone 4S

With the launch of the new iPhone 4S, the excitement of having a cellphone contract ending is like Christmas in October. Unfortunately, only the lucky few can feel this excitement. But what if we could buy our iPhone 4S from Apple directly and avoid the torture of waiting for our contracts to end, or even worse, terminate our contract early and pay hundreds of dollars.

Since 2010 Apple Canada allowed Canadian consumers to buy their iPhones directly from the Apple Store or Apple Online. The big disadvantage was the price, without the subsidized cost offered by a carrier you were paying 3-4 times as much for the latest iPhone. But, one of the of the advantages of purchasing your iPhone from Apple was the iPhone was unlocked, meaning you can use your iPhone on any carrier at any time, and contract free. To some people this was an ideal feature to have. Having the ability to use any SIM card from any carrier at any time allowed the consumer to use their iPhone in any country. And, buy plans that were contract free, also as known as Pay-As-You-Go plans.

Pay-As-You-Go plans use a banked number of minutes and/or text messaging and/or data expiring over a period of time. In some cases, you can have banked minutes that can last up to one year. And, if you run out of minutes, you buy more minutes through your phone or online.

So let's compare costs between a Carrier Contract Plan vs Pay-As-You-Go:

Carrier Contract Plan (in this example I will use Telus Moblility)

iPhone 4S 16GB from Telus Mobility = $169.00

Activation Fee = $35.00 one time fee

Minimum Monthly Plan for iPhone 4S = $50.00/month + taxes = $56.50/month in Ontario

A Telus agreement for an iPhone 4S is 3 years

TOTAL = $169.00 + $35.00 + ($56.50 * 36 months) = $2238 for the length of the 3-year contract

Pay-As-You-Go Plan (in this example I will use Petro Canada Mobility - yes, they are in the wireless business too!)

iPhone 4S 16GB from Apple Canada = $649+taxes = $739.86

SIM Card purchase = $15.00+taxes = $16.95

The Anytime Plan with 400 minutes + 40 bonus minutes (with up to 356 days of service) = $100+taxes = $113

TOTAL = $739.86 + $16.95 + ($113 * 3 years) = $1095.81

But what about data you ask? For an extra $10/month you can have unlimited data!

So the new Pay-As-You-Go Total = $1095.81 + ($120 * 3 years) = $1455.81

You can save about $782.19 over the length of a contractual contract with a cellphone carrier! That's a savings of 35%! If your contractual plans were priced without including the mandatory 911 service fees, adding extra features, coverage charges, etc. the total of $2238 can raise considerably. Not to say that Pay-As-You-Go plans don't have hidden fees as well, but atleast you can say, "my budget was to spend $100 [plus applicable taxes] this year and I used up my minutes, and now I'll reload my minutes, but only in the new year to stay in budget", or "my minutes are used up, I'll only pay for 60 minutes for $15 this time and not add a data plan this month". In other words, flexibility.

Using the Pay-As-You-Go as a budgetary option is very realistic to me. Why should I spend hundreds of dollars more if I correspond with your friends with Facebook, or other social apps. I don't need 200 minutes a month. I want unlimited data on the go, but I don't want to spend more than $10 a month to get it! I want the option to use my phone on other carriers whenever I want, especially when I travel abroad. And, if I can sell my iPhone to get the newest one, I'll get a really good price for it.

I have onep more year until my iPhone 3GS contract expires. Calculating the cost during my 3-year plan, I will be spending over $2800 for this contract.

Once my contract has expired I will highly consider a Pay-As-You-Go plan with, a brand new, unlocked iPhone 5 or iPhone 5S(?).

What is the most you have spent on a contract?

Things to consider if you plan to go the "Pay-As-You-Go" route:
iPhones are unlocked from Apple so you can use your iPhone on any carrier that uses SIM cards (all over the world!)
Initial cost of an unlocked iPhone from Apple is EXPENSIVE!
Resell value of an unlocked iPhone is high
Depending on your talking habits, it may cost you more
No contracts, no credit checks
The carrier's network might not be as reliable
Use the money you saved to pay down your mortgage/student loan, go on a vacation, buy an XBOX 360 and PlayStation 3, buy an iPad 2, invest in 2 Apple stocks, invest into high interest 3-year GICs...LOL!