Editor's Note: Sprint has discontinued its One Up plan and no longer offers an early-upgrade option. Based on our research and price comparisons, T-Mobile's JUMP! is now the most affordable early-upgrade plan of the four major carriers.

In July 2013, T-Mobile introduced Jump, a plan that lets you upgrade your smartphone to a new model or brand twice a year without having to pay extravagant up-front costs. It was a significant addition to T-Mobile's lineup, and it got a lot of attention, especially from smartphone fans who were tired of waiting two years between upgrades. Verizon and AT&T were quick to offer their own versions of the plan, followed most recently by Sprint.

If you love to use the latest and greatest technology, an early-upgrade plan from your favorite cell phone provider can seem like an incredible deal. Be warned, though: You'll pay extra for the privilege, especially if you're a Verizon or AT&T customer. Both companies have you paying for your phones twice over.

How Existing Plans Work

Before we compare early-upgrade cell phone plans, it's important to know where your money's going in your current plan. Verizon, AT&T and Sprint all have fundamentally similar pricing structures, while T-Mobile is something of an outlier   it doesn't have two-year contracts, which affects its overall model. We'll talk about T-Mobile a little later; for now, let's discuss the contract carriers.

People sign two-year contracts so the carriers will subsidize the cost of their pricey smartphones. If you were to buy a 16GB iPhone 5s and sign a two-year contract, you'd pay $199 out-of-pocket. The full retail price of that phone is $649, but you don't have to pay it because the carrier covers the difference. A portion of the charge on your monthly bill ends up covering the full price of the phone. This sort of charge is built into every Verizon, AT&T and Sprint plan   though of course, they charge you a little more each month than your phone actually costs.

 

Understanding Early Upgrade Plans

Where contract plans have you pay the subsidized cost of a new phone up front, early upgrade plans have you pay the full price of a phone, split into monthly charges over two years. This monthly cost gets added to your phone bill, but you don't have to run through the full 24-month period before you can pick another phone. Instead, after between six months and one year (depending on the cell phone provider), you can trade your phone in for a different one and start a new two-year payment plan.

This is where the differences between the major carriers start to matter, and it becomes clear that a good deal of price gouging is going on. Both AT&T and Verizon add the monthly cost of early-upgrade phones on top of your basic monthly service charge. However, that original monthly charge is exactly the same amount you'd be paying if you were in a two-year contract   an amount that incorporates the cost of subsidized phones into its price. This means, in effect, you're paying for your phone twice over: once as part of the basic service charge in whatever talk, text and data plan you sign up for, and the other as an additional monthly charge based on the overall retail price of the phone.

In their One Up plan, Sprint provides a $15 monthly discount to your bill, which can help reduce the overall impact of the phone charge. Since you'll be paying between $20 and $30 each month for the phone, you're still being charged twice for the ability to upgrade early   just not as much as you would be with Verizon or AT&T.

T-Mobile's Take

Among the four cell phone companies that have early upgrade plans, T-Mobile is the only one that doesn't offer long-term contracts. It doesn't subsidize phones and, as a result, its regular monthly plans are as much as $40 cheaper than comparable plans at Verizon, AT&T and Sprint. Since phones aren't subsidized at T-Mobile, you have to pay their full price, but the provider offers monthly payment plans. You pay an up-front cost that varies based on your credit rating, then pay the remainder on a month-to-month basis over the next two years. In practice, customers' monthly bills can be significantly cheaper with T-Mobile than with the other major carriers, even when incorporating the price of a phone payment plan.

T-Mobile's Jump is an extra option you can add on to your service for $10 a month that allows you, up to twice a year, to trade in your current phone for a new one. You have to pay another up-front fee for the new phone   something the other carriers don't have you do on their early upgrade plans   but then you can keep paying the same monthly installments you were paying before. You don't owe the remaining value of your old phone, regardless of how long it's been since you first got it.

Let's Compare

Depending on the features you're comparing, Sprint's One Up and T-Mobile's Jump vie for the title of cheapest early-upgrade plan. T-Mobile's Jump is more expensive than Sprint's One Up, but it comes with free phone insurance and 2GB of dedicated tethering data   you'd have to pay extra for that with Sprint. If you were to add those extra features on to a Sprint plan, T-Mobile is the better buy.

We've broken down the cost differences between the four carriers in the tables below. First, let's look at the two-year cost for basic service plans with each carrier   two years being how long you'd usually have to wait between phone upgrades. Each of these plans offers unlimited talk, text and about 2GB of data. We're assuming in our comparisons that you're buying a new smartphone when you start, and will use the iPhone 5s price for our example.

Cell Phone Providers image: A table showing the pricing breakdown for each of the major carrier's regular plans.

As you can see, the difference between T-Mobile and Sprint is negligible (and will vary for you, depending on the specifics of the plans you get, the features you decide to add, and so forth). However, they're both far cheaper than AT&T and Verizon.

Now let's look at the two-year cost for each company's early upgrade plane. There are two differences between these plans and the ones above. First, we're assuming you're upgrading your phone after the first year of this two-year period. Second, T-Mobile's Jump plan offers phone insurance and tethering data, features that aren't incorporated into the prices of the other plans, because they don't come standard with the early upgrade option.

Cell Phone Providers image: A table showing the pricing breakdown for each of the major carrier's early-upgrade plans.

With their $15 monthly credit and lack of up-front cost   promotions that may change in the future   the Sprint One Up plan costs $77 more than its basic plan over a two-year period. This essentially means that, with Sprint, you could get a second phone over a two-year period and pay just $77 more. T-Mobile's plan is over $300 more expensive than its regular plan over the same period, though you get phone insurance and tethering as part of the deal, and can upgrade twice a year instead of once. Verizon and AT&T remain hundreds of dollars more expensive than either.

Conclusions

Every early-upgrade plan will end up costing you more over time than a regular plan would from the same provider. And, while they may not be contract plans, each of these early-upgrade options locks you into service with a single company. After all, every time you upgrade, you commit yourself to another two years of monthly payments. There are only two ways to get out of those payments before the two years are up: upgrade to a different phone and start the process over again, or pay off the remaining balance on your current phone in one fell swoop.

If you're a Verizon or AT&T customer, we advise against moving to Verizon Edge or AT&T Next. You're already paying a lot more than you would at other carriers so you can use a superior network, but under an early-upgrade plan you'd spend an extra $400 on top of that. If you're a Sprint or T-Mobile customer or are thinking of switching to them, the benefits of their early upgrade plans are much more worthwhile. Until its promotion ends, Sprint's One Up plan is a steal. On the other hand, if T-Mobile's free phone insurance and hotspot tethering appeals to you, you'll get a better deal with them than with anyone else.

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