Author Topic: Should I cancel my phone plan?  (Read 1867 times)

webcat86

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Should I cancel my phone plan?
« on: October 09, 2015, 10:21:02 AM »
I'm in the UK and paying 53 a month for my phone. My contract expires next September, so I make it out to be 583 if I see it through to the end.

I spoke to them on the phone and they said cancelling will cost 487.

I can get a sim-only deal with Three for 11 a month, with enough data and minutes to suit me and it's for 12 months.

Is it worth it? On the one hand I don't want to spend that chunk upfront (I have 2000 emergency cash fund and 11,000 in cash waiting to invest), on the other hand it would give me more flexibility with my monthly outgoings and I could save the difference.

Daley

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Re: Should I cancel my phone plan?
« Reply #1 on: October 09, 2015, 11:28:54 AM »
583-487=96
11*11=121
96-121=-25

It'll cost you an extra 25 over the next eleven months to leave today versus staying put. It's not that the monthly rate isn't a dramatic savings, it's just that the ETF is so high that it's literally cheaper to stick out the contract than pay and leave. From a financial standpoint, the numbers are at best a wash. You'd literally need to find service cheaper than 8/month to actually make the switch sufficiently financially net positive to make any real difference.

Of course, this doesn't scrape at ethical reasons to possibly leave a carrier or simply buying your freedom to leave whenever you want, and I can't speak to whether leaving and paying an extra 25 is worth that to you (only you can answer that), but if the bottom line is the only thing that matters? No. It's not worth it, and third grade math could have given you that answer.
« Last Edit: October 09, 2015, 11:31:49 AM by I.P. Daley »

webcat86

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Re: Should I cancel my phone plan?
« Reply #2 on: October 09, 2015, 01:42:32 PM »

583-487=96
11*11=121
96-121=-25

It'll cost you an extra 25 over the next eleven months to leave today versus staying put. It's not that the monthly rate isn't a dramatic savings, it's just that the ETF is so high that it's literally cheaper to stick out the contract than pay and leave. From a financial standpoint, the numbers are at best a wash. You'd literally need to find service cheaper than 8/month to actually make the switch sufficiently financially net positive to make any real difference.

Of course, this doesn't scrape at ethical reasons to possibly leave a carrier or simply buying your freedom to leave whenever you want, and I can't speak to whether leaving and paying an extra 25 is worth that to you (only you can answer that), but if the bottom line is the only thing that matters? No. It's not worth it, and third grade math could have given you that answer.

What's ETF?

Of course I worked out the actual upfront figures. I was hoping to find out if I had overlooked something - if it was worth just sticking out or if investing the difference each month would yield a bigger net gain

Paul | pdgessler

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Re: Should I cancel my phone plan?
« Reply #3 on: October 09, 2015, 02:57:52 PM »
What's ETF?

In this context, ETF = early termination fee.

More common usage around this forum, ETF = exchange-traded fund.

Yay for TLAs (three-letter acronyms) :-).

webcat86

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Re: Should I cancel my phone plan?
« Reply #4 on: October 09, 2015, 03:04:03 PM »

What's ETF?

In this context, ETF = early termination fee.

More common usage around this forum, ETF = exchange-traded fund.

Yay for TLAs (three-letter acronyms) :-).

Thanks, exchange traded funds is what sprang to mind and I thought it couldn't be that

Daley

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Re: Should I cancel my phone plan?
« Reply #5 on: October 09, 2015, 03:09:30 PM »
What's ETF?

Early Termination Fee. That's effectively what that 487 charge is. It might just be an American mobile carrier term, apologies, but the intent is the same no matter the carrier and country - to put a hidden price on "free" phones/features/etc. and dissuade people from leaving.

Of course I worked out the actual upfront figures. I was hoping to find out if I had overlooked something - if it was worth just sticking out or if investing the difference each month would yield a bigger net gain

Nope, and nope. You'd need at least a solid 10% return on investments just to break even with the 25 penalty. A generous average return of 4% wouldn't even give you a solid 10 over the course of the 11 months on your savings.

Sheer logic alone also states that less money invested = less interest paid back. The interest earned on a single lump of cash invested at the start of a year will be more than the (nearly) same amount of cash when broken into eleven equal pieces and invested piecemeal one month at a time across the same year.

From a financial standpoint, the numbers are at best a wash.

This is clearly hair splitting territory, you're putting way too much thought and effort into justifying the difference of pennies in the big picture. If you want to stay, stay. If you want to leave, leave. It's a personal judgment call, not a financial one... and to that end, nobody here can even evaluate and give feedback on carrier choice because you haven't even mentioned who you're currently with, just that you're looking to switch to Three.

It's great that you're saving money! It's great that you're scaling back and want to spend less on services! What's not great is agonizing over the financial end of something that basic math has already shown to be peanuts. Stop sweating the magic of compound interest on less than 25 worth of money on a 600 financial commitment and focus on what really matters - your quality of life.

Pinch of salt

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Re: Should I cancel my phone plan?
« Reply #6 on: October 11, 2015, 07:29:43 AM »
When I was in a contract, eoin ago now, I usually found that I would use more each month than what the contract was for, even without calling much. E.g I'd have a 30/month plan without any free calls, so the few calls I did make, would add another 5 or 10 to the bill. And there was a limit to the data allowance. It felt good to move onto giffgaff which I pay 12/month for and still use my old phone, which I could not have bought outright at the time (hence signing to the contract), but the feel of relief of knowing that I actually only pay the 12 and nothing more. And I always have loads of call minutes left, texts are unlimited and the 2GB of data is enough as most of my time is spent at places where I can use wifi.
In your case, I would recommend that you view the decision a bit more holistically and take into consideration if you grinch every time you pay the bill or not. If you do, then there's your decision.