AT&T is the last carrier to axe Two year contracts

Two-year contracts will soon be a thing of the past.

Telecommunications giant AT&T has announced that it will stop offering new contracts to consumers next week. It had been the final holdout among the four national wireless carriers. Verizon and Sprint did away with contracts a few months ago, and T-Mobile killed off contracts in 2013.

As reported by CNN, instead of signing a contract, AT&T customers buying new smartphones will have to sign up for an “AT&T Next” device payment plan, in which they pay off the cost of their phone over the course of time. AT&T will officially stop offering contracts on January 8.

Customers currently under contract will be grandfathered in — until they want to buy a new phone from the company. Business customers will still be able to sign up for contracts.

Two-year contracts soon to be a thing of the past

Two-year contracts soon to be a thing of the past

AT&T said in a statement that the vast majority of its customers were signing up for AT&T Next plans, so ending contracts was a logical step.

The Next plans tend to be cheaper than the two-year contracts, and they offer customers perks such as no down payment and the ability to upgrade early.

Two year contracts have become virtually extinct, as cell phone companies look to end expensive phone subsidies.

That’s not just a good deal for the carriers — it’s good news for consumers too. Ending the two-year deals adds transparency to what used to be an opaque process. It was unclear how much you were paying each month for your phone and how much you were paying for your service.

The new no-contract plans let you comparison-shop more easily, and you’re no longer locked into a long-term deal.

As a result, carriers have recently tried to outdo one another on deals.

Here’s an explanation of the changes: of the Two year contracts:

WHAT ARE MY OPTIONS NOW?: Most people now buy and pay for phones in monthly installments, though you can also pay the full price upfront. You can also bring a used device, such as one from a friend or family member who has upgraded to a newer model. Sprint and T-Mobile also have leasing options.

WILL I PAY MORE?: Not necessarily so, even though you now have to pay the full price for a phone.

When you got a discounted phone under contract, you were already paying the balance in the form of fees. For instance, the full cost of an iPhone 6s is $650. Although you pay just $200 at the contract rate, the phone company passes along the remaining $450 in higher monthly fees for voice, text and data. Over two years, the $450 comes to $18.75 a month. If you forgo the contract, your monthly bill for voice, text and data is typically reduced by $15 or $25 a month. The $25 discount applies for higher data plans – usually ones you share with family members. In such cases, you’re actually better off buying the phone yourself.

If your discount is only $15, and you’re giving up $18.75 in subsidies, then technically your bill is going up slightly. What you get instead is flexibility.

WHAT DO YOU MEAN BY FLEXIBILITY?: Because phone companies were subsidizing phones, there was an incentive to get the most expensive model, even if you didn’t need that. These days, there are many mid-range Android phones that do what high-end phones did just a few years ago. If you choose one of those, you keep the savings. That’s also the case if you get a friend or relative’s old phone. More important, you’re no longer tied to two-year contracts.

If you buy a phone under an installment plan, you’re still stuck with the phone company until you pay off the phone. That said, rival companies often have promotions to pay off the balance for you. And if you pay the full cost of the phone upfront, you own the phone and can switch whenever you like. Just be aware that certain phones work on a limited number of networks, so it’s still not total freedom.

CAN I STILL GET A SUBSIDIZED PHONE?: Sprint still offers contract plans, though they aren’t emphasized and they may disappear any day. Verizon offers contracts only to existing customers who renew. At AT&T, contracts will be offered only under certain business plans.

What do you think of the end of two-year contracts?  Let us know in the comment section below.