Verizon Wireless recently ditched two-year contracts in favor of a full retail pricing model. The Verizon Plan is simpler than ever, but it’s likely to be even more confusing than it needs to be, because the carrier has clarified that it will continue to offer two-year contracts to existing customers.
This means that you can still get that shiny new iPhone for $200, but that doesn’t mean that you should continue to do the same thing that you have done in the past. Paying upwards of $600 for a brand new phone can be scary, but the truth of the matter is that most customers will actually save money in the long run by opting for the Verizon Plan and paying the full retail price for a new smartphone. Even so, customers in certain situations will be better off sticking with two-year contracts.
This guide will break down how the Verizon Plan works, what your options are, and how it will affect you.
How the old plans used to work
We thought we would get started by explaining how things were prior to the new plan, in an effort to better understand how things will be moving forward.
Let’s start with traditional contracts, or what Verizon refers to as the More Everything plans. Verizon discounts smartphone prices in exchange for your commitment to remain on the network for two years. For example, with a two-year contract, a phone with a full retail price of $600 will only cost you $200.
This $400 “discount” is what we call the subsidy. Discount is in quotes because it’s really not a discount. Verizon would still get that $400 from you as part of your monthly service payment over the two-year contract period. In other words, you pay more for your service to pay back this subsidy. The problem with the two-year contract method is that your monthly payment stays the same once your two-year contract is fulfilled. The longer you hold onto your phone, the more money you waste.
Based on this information, it’s clear why Verizon isn’t completely ditching two-year contracts. It’s a money maker, as we will point out below.
Verizon started offering Edge Plans a couple of years ago, which were very similar to a full retail cost model. Customers who went with this plan would pay full retail for their phone, and get a discount off of the monthly access fee, since Verizon wasn’t covering the cost of the subsidy. The price of the phone would get broken down into monthly payments without interest, which would get added to the monthly cost of service. Once the phone was paid off, only the discounted monthly service portion would remain.
Customers were able to upgrade to a new phone once 75 percent of the phone was paid off by trading in their old phone. However, Verizon made an adjustment to this plan in May 2015. Trade-ins were eliminated, and customers were required to pay off their current phone in full before they could upgrade.
This brings us to new Verizon Plan. It’s actually a lot like how the Edge program was after May 2015.
How the new plan works
The Verizon Plan explained
As of August 13, 2015, all new Verizon customers buying a new phone will be required to pay the full retail cost of the device. Customers can choose to pay the amount in full or spread it out over 24 months interest free. Existing Verizon customers on contract plans can also choose the Verizon Plan, but are not required to.
Monthly access fee
- The access fee for all smartphones is $20 per month, and it includes unlimited calls and texts.
- 1GB / $30 per month
- 3GB / $45 per month
- 6GB / $60 per month
- 12GB / $80 per month
Data is shared with all lines on each account and can be upgraded or downgraded at anytime. Data overages will be billed at $15/GB, and there is no data rollover, so make sure you get the right amount.
Your monthly cost will be the sum of your access charge per line, your chosen data bucket, and the payment for your phone (assuming you’re not paying the full amount at once).
A real life example
Here’s how it would break down if you were to have two people on a plan and buy a 32GB Samsung Galaxy S6 and a 16GB Apple iPhone 6S with 6GB of shared monthly data:
The Galaxy S6 currently goes for $576 or $24 per month for 24 months. The iPhone 6S costs $650 or $27 per month for the same 24 months. The monthly access fee (as outlined above) for unlimited calls and texts will be $20 per line or a total of $40 for the two lines. The 6GB of shared monthly data (as outlined above) costs $60 per month.
Your total cost per month:
- Galaxy S6: $24
- iPhone 6S: $27
- Monthly access fee for two phones: $40
- 6GB of shared monthly data: $60
- Total cost: $151
Once your phones are paid off, your payment would drop to $100 per month, and would remain at this amount until you purchase new phones.
Questions on the new plan
When can I upgrade?
With the new plan, you can upgrade whenever you want, but your current phone must be paid in full. You can pay off the balance of your phone at anytime, and you can do whatever you want with it. This means you can give it to another family member, or you can sell it and use the proceeds to pay for a new phone.
Can you trade-in your phone for a credit towards a new phone?
Verizon used to offer trade-ins with the old Edge plans, but currently there is no such option under the new plan. However, it’s likely that Verizon will offer trade-in promotions at various times to entice customers to purchase a new phone using the Verizon Plan. For example, the carrier is currently offering up to a $400 credit for limited time if you trade-in an old iPhone when buying a new iPhone 6S or
Can I keep my existing plan?
You can not only keep your existing monthly plan, but you can also continue to buy phones at the two-year contract pricing. It’s unclear how long Verizon will allow this, however.
If you like your current monthly plan, you can still purchase your next phone at the full retail price or use the 24 month installment plan. This solution is perfect for customers who are still on grandfathered unlimited data plans. Before now, those customers had to pay the full retail price (no payments) in order to keep their unlimited data.
Can I switch to this plan while I’m still under contract?
You can switch to one of the new data buckets (outlined above), but your access fee will remain the same until you either upgrade or fulfill your two-year contract. For example, if you’re in the middle of a two-year contract on the More Everything Plan and you’re paying a $40 per month access fee, the fee will remain at $40 until your two-year contract has been fulfilled. At that point your access fee will drop to $20, even if you don’t upgrade your phone.
Note: Once you switch to the The Verizon Plan, two-year contract pricing will no longer be available to you.
Edge customers who are still paying off their current phone can also switch to the new plan and continue to make payments.
Will The Verizon Plan save you money?
You should save money under most circumstances, but it might not always be earth shattering. It really depends on how many lines you have and how much data you use.
Let’s go back to the example we outlined above. If you want to keep your plan and buy the Galaxy S6 and iPhone 6S under contract, you would pay $200 each for the Galaxy S6 and
The Verizon Plan is still better than earlier plans, even if you find out that you’re not saving that much. You now know exactly what you’re getting and you’re in control of your device and cell service. When you go into a store to buy any other consumer good, you pay whatever the selling price is. There are no hidden secrets or tricks. By paying the full retail price for your phone, the carrier’s misguiding tactics are limited. You can now shop around more effectively by comparing the prices for the phone, the monthly cost of service, and the overall network coverage in your area.
Who should not switch to the new plan
Who should stick with two-year contracts?
About two years ago, Verizon offered a loyalty plan for single line customers that had been with the carrier for many years. This plan included unlimited calls, texts, and 2GB of data for only $60 per month. The offer was essentially a price that only Edge customers enjoyed, but the kicker is that customers were still allowed to purchase phones at the two-year contract price, assuming they signed on for the two years. These customers are going to want to stick with their current plan and here’s why:
Let’s go back to our example, but we will go with just the Galaxy S6 since this scenario is for a single line account. Customers on the loyalty plan can still purchase the Galaxy S6 for $200 and continue to pay $60 per month. That’s a total of $1,640 for the two-year period.
However, if the customer were to switch to the Verizon Plan and upgrade to a Galaxy S6, they will need to pay the $20 monthly access fee, plus either $30 per month for 1GB or $45 per month for 3GB (no 2GB option). We will go with the 3GB plan since we’re assuming the customer needs 2GB. The monthly cost comes to $65 per month, which is $5 more per month, but it includes 1GB of extra data. Customers could also keep their current plans if they wish and not spend the extra $5. The problem is that in either situation, the customer needs to cough up $576 (or $24 per month) for the phone instead of the usual $200 contract price. This scenario comes to $2,136 for the same two year period (with the $65 plan) or $2,016 (keeping the old plan), which is a loss of either $496 or $376, respectively. Ouch!
You can clearly see why these customers will want to continue to buy at the two-year contract price for as long as Verizon allows them to.
We obviously can’t cover every situation, so it’s up to you to look at your current plan and compare it to the Verizon Plan like we outlined above. That way, you can see if it makes sense for you to switch. We believe that most customers will see a savings upon switching. The bottom line is that buying a phone at the full retail price as opposed to a discount under a contract is the best method, since everything is spelled out with no hidden gimmicks.
We hope this guide helped you better understand the Verizon Plan. If not, don’t hesitate to ask us a question in the comments, and we will try to get an answer for you. You can also check out the Verizon Plan FAQs.
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