The theory behind signing a contract with a wireless carrier is that you get a heavily discounted phone in exchange for a commitment to stay with the company for a couple of years, or pay a penalty if you want to jump ship. If you’d rather bring your own phone, make sure it’s compatible with your carrier’s network -- and don’t sign a contract for your new plan.
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Customers of AT&T and T-Mobile, which operate on GSM networks, can insert a SIM card from the carrier into an “unlocked” GSM phone. Neither company requires customers who bring phones to sign a contract. You can buy unlocked phones on Amazon and eBay, or at Best Buy. Google offers an unlocked Galaxy Nexus for $349.
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It’s less straightforward with Sprint and Verizon Wireless. Typically, you’ll need to find a device branded by the carrier to use it on their CDMA network. Verizon offers a no-contract option to those who bring their own phone, but you may have to negotiate with a Sprint manager to go contract-free.
This article first appeared in Kiplinger's Personal Finance magazine. For more help with your personal finances and investments, please subscribe to the magazine. It might be the best investment you ever make.
