Contract or no-contract? Tough choices for an AT&T wireless customer

Remember when the only thing you had to know when signing up for a wireless plan was how many voice minutes you wanted?

Long gone are the days when consumers could easily pick and choose the services they wanted as part of their phone plans. Now wireless operators have made their plans so complicated and difficult to understand it practically requires someone with an accounting degree to figure out which offers the best value. Newer subsidy-free device installment plans, such as AT&T's Next plan and T-Mobile's Uncarrier offering, muddy the waters further.

In this edition of Ask Maggie, I help one AT&T customer decipher the complicated programs to see which plan will save him the most money.

Dear Maggie,

My wife and I are currently AT&T wireless customers. I have an 64GB iPhone 5S and my wife has an inexpensive flip phone. She has a plan that doesn't allow data or texting on her phone. I have an unlimited data plan, 200 text messages a month, and we share 550 minutes of talk time. We have rollover minutes and currently have about 5,800 minutes. The most data I have ever used in a month is 2.5 GB. I text a few friends who don't have an Apple product, but the most text messages I've used in a month is about 96. Our current bill is $114.65 a month.

I'm wondering if we should change our plan. Here's the scenario: My two-year contract is up September 20, 2015 and her contract is up November 20, 2015. My wife has indicated that she would like my iPhone 5S, which means I would purchase the new iPhone 6S (possibly due out this fall). I'm not one of those individuals who has to get the next iPhone as soon as it comes out, so I'd definitely be keeping my next iPhone for as long as possible.

We visited the AT&T store and they recommended we transition from our traditional plan with AT&T to the Next Plan. They told me that we cannot share my unlimited data plan if we add a smartphone for my wife. If I were to keep my unlimited data plan, she would have to subscribe to a separate data plan and the cost for both of us would be about $140 a month. If we were to use the Next Plan we could share 3GB of data, have unlimited texts and talk time and save some money. I believe that once I pay off my new iPhone, our monthly cost would be reduced. I don't know by how much.

Most websites I've read overwhelm me. My initial reaction is to go with the Next Plan, especially since we don't use much data. I do like the idea of being able to have unlimited texting. Even though I have accumulated so much talk time, for some reason I don't use my iPhone during the peak time because I believe I might use up all my minutes.

Your expertise and insight would be much appreciated.

Thanks,

Howard

Dear Howard,

You aren't the only one who is confused by wireless service plans. The best way to figure this out is to sit down and do the math. But before you break out the calculator and get to work, you first have to understand the plans that AT&T offers.

AT&T no longer offers new customers the ability to buy a set amount of voice minutes or text messages and an unlimited amount of data. Instead, the new plans give all customers unlimited voice and text messaging. Customers then pay additionally for a bucket of data which they are able to share among other subscribers or multiple devices. About 70 percent of AT&T's postpaid customers, or customers who pay their bill at the end of the month, have a so-called Mobile Share Plan.

The Mobile Share Plans are priced according to the amount of data chosen. And for every device, such as a smartphone that is connected to the plan, another fee is charged. Customers can then choose to either sign a two-year contract and buy a new smartphone at a subsidized price, or they can forgo the contract and buy the device at full retail price or bring another device to the service.

AT&T charges customers on a contract $40 for each smartphone attached to the service. And it offers customers who do not sign contracts and do not take a subsidized device a $15 discount on their monthly service if they subscribe to 6GB or less of data each month. Customers who subscribe to more than 6GB of data get a $25 discount for each smartphone connected to the Mobile Share Plan.

Customers who want to take advantage of the no-contract plan, but who don't want to pay the full price of the device at the time of purchase, can sign up for AT&T's Next program, which allows subscribers to pay for their devices in installments. It also allows customers to trade-in devices even before they are paid off, in order to get a new one.

To figure out which option is right for you, you should check out a tool on AT&T's website that allows you to adjust the number of devices on a plan as well as configure different amounts of data to compare pricing between a no-contract plan and a traditional contract plan.

The tool is useful, but if you plan to finance your device using the Next program, keep in mind that the monthly cost of the phone will be added to your service charge until the device is paid off or until you trade it in for a new device. This means there are flat fees for the service, and then AT&T gives you options for either purchasing a new device or bringing one you already own to the network. Buying a new device all at once or financing it over several months will increase the overall cost of ownership and may increase your monthly bill. By contrast, contract plans, like the unlimited data plan you are on, offer subsidized phones, and the price of that device is bundled into the overall cost of the service.

The complicating factor in your scenario is that you are subscribed to an unlimited data plan that's no longer offered by AT&T. You didn't specify how much you pay for your unlimited data plan and AT&T doesn't offer a tool to calculate it since those plans are no longer available to new customers. But my guess is that you are paying around $70 or $80 a month for your unlimited data plan, voice calling and text messaging.

To figure out your best option, I'll walk you through the three scenarios you should consider.

No-contract option

If you sign up for the Next plan and your wife gets the Mobile Share Value Plan, you can subscribe to a 3GB data plan, which you will share. The cost of this plan for you both is $90 a month. This includes the $40 it costs for the 3GB of data and $25 a month each to connect a smartphone to the data plan. Then you will need to add on the cost of any new devices. If you finance your new iPhone using the Next program, you have four options for paying for your new device. Keep in mind that under of each of these plans, once the phone is paid off you no longer pay the cost of that device. This means the cost of your monthly bill goes down.

The AT&T Next 24 payment plan breaks up the total cost of an iPhone 6, which retails for $650, over 30 monthly payments of $21.67. This plan allows you to upgrade your device after 24 months of payments. This means you can trade-in the phone after 24 months and get a new one.

AT&T Next 18 offers you 24 monthly payments of $27.09 with the option to trade in your device after 18 months. AT&T Next 12 breaks down to 20 monthly payments of $32.50 with the option to trade-in your phone after 12 months. And AT&T Next with Down Payment requires a $195 down payment when you purchase your device and the monthly payments are figured over 28 months at $16.25 per month. But you will be able to trade-in your device after 2 months.

So depending on which option you choose, you'd add that to your monthly bill. Once you've finished paying off your device, the cost of your monthly bill would be reduced by the same amount you were paying to finance your smartphone.

Let's say that you opted for the Next 18 plan. You would simply add $27.09 to your monthly bill of $90 for a total of $117.09. That's only a few more dollars than what you pay now each month. And after 24 months when your new iPhone is paid off, your bill will be reduced by $27.09 per month to $90 a month.

Keep unlimited data; put your wife on a contract plan

Your unlimited data plan is considered a traditional contract plan. So if you wanted to upgrade to a new iPhone in September and renew your contract, you'd pay $200 for the new phone and then you'd continue paying the $70 o $80 a month you pay for your current service. You'd then sign up your wife for a separate smartphone plan that includes one of the new data options. The least expensive option is 1GB of data for $25 a month. Then add $40 a month to connect your old iPhone 5S to the service. (This connection fee is discounted $15 under the Next plans for each of you, regardless of whether you finance a device or bring one you already own.) Together your plans will cost you roughly $135 to $145 a month.

Keep unlimited data; put wife on a no-contract plan

There's one more scenario you should consider. Let's say you keep your old unlimited data plan. Again you will continue to pay $70 to $80 a month. Instead of signing your wife up for a traditional contract plan, she could sign up for an out-of-contract Mobile Share Value Plan. This plan still gets the $15 discount on your service. The 1GB of data plan will still cost $25 a month, and she will only pay $25 to connect your old iPhone 5S to plan. Her monthly cost will be $50 a month ($25 for data + $25 for device= $50). This means your total monthly cost would be $120 to $130 a month.

The bottom line

The cost to keep your unlimited data plan under a traditional contract and to put your wife on a no-contract Mobile Share Value Plan is roughly the same as it would cost you if you signed up for the Next plan and she remained off contract and simply signed up for the Mobile Share Value plan. What's more, each of these options is about $20 cheaper than putting your wife on a traditional contract while you keep your old unlimited plan.

But if you are both on no-contract plans, and you keep the new iPhone you plan to buy for more than two years, you could save $30 to $40 a month. (Of course that's assuming that your wife doesn't need a new phone by then.) At any rate, the potential for savings is greater under the Next plan and the no-contract Mobile Share Value plan than under traditional contract plans.

What should you do? I'd ditch the old unlimited data plan and switch to the no-contract plans for you and your wife. It's hard psychologically to let go of unlimited data. But based on your current usage, you're overpaying for your service. You don't really need unlimited data. And under the Next plan, you have the option to save quite a bit of cash down the road.

I hope this advice was helpful. And good luck!

Ask Maggie is an advice column that answers readers' wireless and broadband questions. If you have a question, I'd love to hear from you. Please send me an email at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header. You can also follow me on Facebook on my Ask Maggie page.