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No-contract iPhone 5 is a better deal in the long run

No-contract iPhone 5 is a better deal in the long run

Would you rather pay $200 or $650 for the Apple iPhone 5? Go for the more expensive iPhone with a no-contract carrier, and you’ll save about $1,000 over a two-year period.

To get the iPhone for $200, you have to sign a two-year contract that includes high monthly bills for voice and data service: $100 a month with Verizon and $110 with AT&T. Buy the phone from no-contract carriers Straight Talk or Cricket and you’ll pay more upfront but have to fork over only $45 and $55 a month, respectively—about half as much as with the contract plans. Multiply those monthly savings by 24, and you’re talking real savings.

Not only that, but you get an unlimited data plan with Straight Talk (also available through Walmart) and Cricket. True, they’ll throttle back connection speeds after 2GB (meaning your Web activities will slow down), but that’s a limit few smart phone users reach.

By contrast, Verizon allows 2GB per month, and AT&T allows 4GB. You’ll be charged $15 for every gigabyte above and beyond your monthly allowance. And it’s not hard to burn through your data allowance: Watching just one HD movie can eat up 700MB of data, or more than a third of a monthly 2GB.

Lower service charges don’t mean lower quality service: In Consumer Reports’ 2013 cell service survey, Straight Talk was judged more satisfying overall than contract service from any major carrier, and it received data scores on a par with Verizon. Cricket is a newer carrier that wasn’t used by enough respondents to be covered in the survey. Both carriers claim to offer nationwide coverage.

And another benefit of going prepaid: You can suspend service at any time without incurring early termination fees, which on AT&T and Verizon can exceed $350.

Here’s a head-to-head comparison.

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