• Page :
  • 1
  • Text Only
rated:
Something I notice as I am looking for a new phone is that the subsidy for buying with a contract is sometimes a lot more than the ETF.

For example, to buy a Galaxy Note 2 from T-Mobile with a contract is $300, and there is an additional $100 MIR. Let's call it $225 after sales tax and rebate. The ETF is $200. Without a contract, the phone costs around $700. (Some places are charging $800; others slightly undercutting to around $660).

So it seems to make more sense to buy the phone on a contract, carry a $60 plan for maybe two months (as long as it takes to get the $100 rebate), then cancel and pay the ETF. You'll have a phone without a contract, plus two months of service, for a total outlay of about $560 when you account for taxes and fees on the plan. Saving at least $100 compared to the off-contract price of the device alone.

I looked through T-Mobile's terms and conditions and didn't see anything about paying back the subsidy if you cancel the contract early. The ETF is it.

Any thoughts on whether this works? Better yet, any personal experience trying it?

Member Summary
Most Recent Posts
Regarding the Nexus devices, Google appears to be subsidizing the price, expecially for the Nexus 4 and nexus 7, in an a... (more)

sillar68 (Jan. 06, 2013 @ 1:42p) |

There is zero truth to any of what you stated.

Google is selling these at or slightly above their cost. They are not sub... (more)

outtawhack (Jan. 06, 2013 @ 2:27p) |

miserly (Jan. 06, 2013 @ 5:03p) |

Thanks for visiting FatWallet.com. Join for free to remove this ad.

It'll work once or twice then they will not accept new apps from you.

tax is on the full amount, at least in CA, then there are activation charges and more taxes, fees. and GN2 can be had for $650 from Newegg.com tax only in limited states. so i think your savings, if any, will be reduced quite a bit. also, the rebate itself may have strings attached.
at the end of the day, i suspect it's a lot of work, for potentially relatively small savings.

I believe CA is an exception. Here in IL tax is based on the price you pay. Even if you can get the phone unlocked for $650, that's still $100 savings, and you save two months of service you would otherwise be paying for.

If you use Google Voice as your main number then there would seem to be very little effort involved as you wouldn't even have to port your number. Just fill out the rebate, call and cancel when you receive the rebate. 15 minutes of work for $100+ saved...

Now, if there is a potential for future adverse action from the maneuver, as forbin suggests, that is something to consider.

Also of note, I recently purchased a phone at Radio Shack and when you agree to the electronic terms and conditions there, it states if you cancel in the first 90 days without returning the phone, they can charge your credit card the full amount of the phone AND you will still have an ETF from the carrier, so if anyone thinks this is a good idea (for very little savings), keep that in mind if you buy from a third party... Or pay cash!

Wilco1977 said:   Also of note, I recently purchased a phone at Radio Shack and when you agree to the electronic terms and conditions there, it states if you cancel in the first 90 days without returning the phone, they can charge your credit card the full amount of the phone AND you will still have an ETF from the carrier, so if anyone thinks this is a good idea (for very little savings), keep that in mind if you buy from a third party... Or pay cash!

Yes, this is a "gotcha" from resellers. Let'stalk.com, Wirefly.com, RadioShack, bestbuy, etc. all have built in extra penalties above the ETF if you sub through them and quit. This is why you can often get a device at <carrier advertized price if you buy through them, i.e. $149 for X superphone on launch when the carrier releases it at $199. The 3rd party is subsidizing that cost, if you bail on them the carrier will probably bill them back for their commission hence them passing along the middle finger to you.

Still, signing a contract then bailing for a high-end device has some merit and I thought about it this fall and winter for the GN2. Ended up not doing it because my it wouldn't fit in a pants pocket!

The thing is that you'll still need a phone plan and a data plan in order to really utilize the phone.

For most people it doesn't make sense to buy a subsidized phone, break the contract(paying $200 or whatever the ETF is) and then signing up for a plan at the same price or similar price to the contract you just broke.

Maybe in Europe or Asia it's different, but at least in the USA the options are limited if you want decent service.

I'd love to get the Note 2 but sadly they have yet to even announce a 64GB option.

technolich said:   The thing is that you'll still need a phone plan and a data plan in order to really utilize the phone.

For most people it doesn't make sense to buy a subsidized phone, break the contract(paying $200 or whatever the ETF is) and then signing up for a plan at the same price or similar price to the contract you just broke.

Maybe in Europe or Asia it's different, but at least in the USA the options are limited if you want decent service.

I'd love to get the Note 2 but sadly they have yet to even announce a 64GB option.


T-Mo has a $30 prepaid plan. Unlimited text and data, plus 100 minutes. That's what I was thinking I'd switch to, if they didn't blacklist the phone after I cancelled.

Another thing that occurred to me is that they would do a hard pull with the contract signup. That has a cost that I didn't account for in the OP. In all, it may be closer to a wash.

satchelsofgold said:    In all, it may be closer to a wash.

my sense is that if this were that profitable, we'd all be doing it.

As previously posted, you do not want to try this through Radio Shack or any other third party retailer. They are paid a commission on each activation, which they are backcharged if you cancel. Many will have you sign an additional contract allowing them to come after you for this commission if you cancel.

miserly said:   satchelsofgold said:    In all, it may be closer to a wash.

my sense is that if this were that profitable, we'd all be doing it.


That may be true, but I would rather reason through whether it would work or not, rather than just accept that there can't possibly be a $20 bill on the sidewalk because someone would have picked it up.

It's not scalable like dollar coins, so we're really just talking about a one-time discount. But for someone considering buying a phone off contract anyway, a $100+ discount (15% or so) doesn't seem like anything to sneeze at.

Assumptions (UPDATED w/FatCash, thanks javaman2003):
Choices are between buying the phone with contract from T-Mobile for $300 and $100 MIR, or without a contract for $650 from Newegg.
$37.50 FatCash from T-Mobile; 1% from Newegg
Phone ships to IL in either case, so 7.5% tax on the purchase price of the device from T-Mo, and no tax from Newegg.
Contract plan is $60; off-contract plan is $30
Taxes and fees on plan are 10%
Takes two months of service to get the rebate
$35 activation fee on contract phone
NO activation fee on the no-contract phone

Cost of with-contract phone:
$322.50 (device and sales tax)
- $100 (rebate)
- $37.50 FatCash
+ $132 (two months' service, fees and taxes)
+ $35 (activation fee)
+ $200 (ETF)
= $552

Cost of no-contract phone:
$650 (device)
- $6.50 FatCash
+ $66 (two months' prepaid service, fees and taxes)
= $709.50

Savings: $157
Intangible costs and risks with on-contract phone: possibility of AA, hassle, hard pull if not current T-Mo customer, risk that the rebate takes longer than two months of service or gets lost in the mail, risk that FatCash remains pending too long.

This idea has been around for sometime i guess. I did this 2yrs back to get a smartphone on the cheap. As i was not looking for a specific model, i waited for Tmobile to put a smartphone with decent specs to free on 2yr signup. They do this once a quarter.

Got the phone on the cheap. As the phone was free, i had one month of service to pay + ETF.
One thing you missed on your calculation is FatCash. It is $37. you get free activation.

i have cancelled straight away on tmobile after upgrade, etf only was due

pietromoon said:   yesFixed it for you.

If you are correct, could you scale it? Maybe a whole family plan?

pietromoon said:   i have cancelled straight away on tmobile after upgrade, etf only was due So instead of giving TMobile 2 months of service you gave them 24?

Instead of doing all that, buy iPhone with insurance. Give it to a friend and claim a new one.
I am not a big fan of this trick but heard people doing that.

pavankalyan2011 said:   Instead of doing all that, buy iPhone with insurance. Give it to a friend and claim a new one.
I am not a big fan of this trick but heard people doing that.

Believe that is called insurance fraud.

using insurance is not classic,but pay etf is definitively legitimate and cheaper. especial for iphone and samsung s3. some companies and organization and sometimes mobile shops can waive the activation fee

cheapest iphone is 127 + etf 350 = 477 +tax and that's much cheaper than the $650 + tax
s3's best price is anywhere from $1 to $100. you can score one of these and use pre pay plan if you want

If you buy the nexus 4 from google play, you'll save $350 from your above no contract phone calculation. plus have the latest and greatest phone.

kthejoker20 said:   If you buy the nexus 4 from google play, you'll save $350 from your above no contract phone calculation. plus have the latest and greatest phone.
Plus the phone is unlocked

Apologize that this is off-topic, but can anyone explain why a 5.3" Galaxy Note 2 costs $700 but a 7" Nexus 7 tablet costs $200... Same thing goes for iPads versus iPhones, the cost of the radio can't explain the difference.

Edit: For instance, a current generation Retina iPad WITH LTE radio costs $629, but an unlocked iPhone 5 costs $649 (both with 16GB). Shouldn't the larger tablet be costing more?

kthejoker20 said:   If you buy the nexus 4 from google play, you'll save $350 from your above no contract phone calculation. plus have the latest and greatest phone.

Latest and greatest, maybe. But I want the biggest.

regarding the iPhone insurance trick, definitely be careful bc now the big carriers are actually blocking imei numbers for "lost/stolen" phones meaning your friend wouldn't even be able to use the phone. I would think the insurance company would automatically add the imei number to the block list should you put a claim in..

woolooloo said:   Apologize that this is off-topic, but can anyone explain why a 5.3" Galaxy Note 2 costs $700 but a 7" Nexus 7 tablet costs $200... Same thing goes for iPads versus iPhones, the cost of the radio can't explain the difference.

Edit: For instance, a current generation Retina iPad WITH LTE radio costs $629, but an unlocked iPhone 5 costs $649 (both with 16GB). Shouldn't the larger tablet be costing more?


Regarding the Nexus devices, Google appears to be subsidizing the price, expecially for the Nexus 4 and nexus 7, in an attempt to lure more consumers in to their ecosystem, and give them a wider audience to target advertising they can sell to advertising buyers.

Regarding the Apple devices, I would think the pricing structure affects pricing, given most iphones are bought on contract subsidized through the carrier, whereas the majority of iPads are sold directly to consumers with no subsidy. I don't know the price Apple sells the iphone to Verizon, AT&T and Sprint. Also, I believe there is a cost associated with "miniaturization" to basically stuff similar performing components in a smaller box and maintain high performance levels. I don't think its just a matter of bigger/more materials equals more cost.

sillar68 said:   woolooloo said:   Apologize that this is off-topic, but can anyone explain why a 5.3" Galaxy Note 2 costs $700 but a 7" Nexus 7 tablet costs $200... Same thing goes for iPads versus iPhones, the cost of the radio can't explain the difference.

Edit: For instance, a current generation Retina iPad WITH LTE radio costs $629, but an unlocked iPhone 5 costs $649 (both with 16GB). Shouldn't the larger tablet be costing more?


Regarding the Nexus devices, Google appears to be subsidizing the price, expecially for the Nexus 4 and nexus 7, in an attempt to lure more consumers in to their ecosystem, and give them a wider audience to target advertising they can sell to advertising buyers.

Regarding the Apple devices, I would think the pricing structure affects pricing, given most iphones are bought on contract subsidized through the carrier, whereas the majority of iPads are sold directly to consumers with no subsidy. I don't know the price Apple sells the iphone to Verizon, AT&T and Sprint. Also, I believe there is a cost associated with "miniaturization" to basically stuff similar performing components in a smaller box and maintain high performance levels. I don't think its just a matter of bigger/more materials equals more cost.


There is zero truth to any of what you stated.

Google is selling these at or slightly above their cost. They are not subsidizing anything.

Apple uses the same parts in their products to maximize efficiency. The iPhone uses the same exact CPU as the iPad.

iPhone is a cash cow for apple because they can force the carriers to pay msrp or les if they order enough (see sprints gamble on the iPhone). If there were no carriers apple wouldn't be able to charge $649 retail for the latest iPhone. It would be $499 or less.




Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014