NEW YORK — Verizon is doing the unthinkable: Starting Thursday, the nation's largest wireless company will join T-Mobile in dropping contracts and discounted phones entirely for new customers. People will buy phones outright, with the option of paying the full retail price in monthly, interest-free installments.
This will be better in the long run. Although it's nice to get a $650 phone for $200 with a contract, you pay for it in higher monthly fees for voice, text and data services.
The contract system benefits those who upgrade at the two-year mark and buyers of the most expensive phones. With the change, you keep the savings when you opt for a cheaper phone with all the features and performance you need.
But contracts might benefit you in the short run. With changes looming, should you rush to get a discounted phone, or wait? Here are some things to consider:
Don't need latest model?
If you're already with Verizon, you can keep your current plan. What's not clear is whether you'll be able to get a discounted phone.
If you're eligible for a new phone, it's safer to do so before the new plans kick in.
Still, there's been speculation Apple and Samsung will come out with new models soon. There's a risk of having to pay full price if Verizon doesn't offer discounted phones to existing customers.
More than you need
Even paying full price for the phone, you might break even or save money under the new plans. In general, service prices for voice, text and data are going down by about $20 a month, offsetting the value of the subsidy you're losing under contract.
Couples and families sharing larger buckets of data might get price cuts under the new plans, but choices will be limited to 1, 3, 6 and 12 gigabytes. If you have something in between, think twice before switching.
Employer reimbursement
If your company pays for all or part of your phone service, but not the phone itself, the new plans will hurt. Prices under the new plans will better reflect actual costs, but that means less service fees to reimburse.
You might want to game the system for another two years by getting a discounted phone now.
Installment contract
Unless you want to pay for the full price of the phone up front, you can typically spread your payments over two years, interest free. In that case, your two-year service contract gets replaced by a two-year phone installment plan. So you're still stuck with Verizon. Don't switch to a new plan simply to avoid the contract. Many rivals will pay any penalties anyway if you have to break your contract to switch.
