Buying phones as holiday gifts: The best ways to get around an old carrier contract.

How to Buy a New iPhone for Someone on an Old Phone Plan

How to Buy a New iPhone for Someone on an Old Phone Plan

Moneybox
A blog about business and economics.
Nov. 26 2014 1:42 PM

How to Buy a New iPhone for Someone on an Old Phone Plan

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iHolidays.

Photo by Justin Sullivan/Getty Images

The iPhone 6 has already carried Apple to a record-breaking quarter and on Tuesday led the company to an unprecedented $700 billion valuation. According to a report this week, that's likely only the beginning. By one analyst's estimate, Apple will sell another 71.5 million iPhones during the current quarter and holiday season. More than half of those devices will be the big-screened iPhone 6.

It's quite possible that you too want to get in on the iPhone 6 gift action—maybe for a friend, a family member, or for yourself. Which leads to the inevitable question: How do you buy a new smartphone for someone who's still locked into an old contract?

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Ideally, the gift recipient either has an available upgrade or is on a plan with someone else who has an upgrade. If not, though, the options are going to depend on the carrier. With Verizon, giving a new device to a customer who does not have an eligible upgrade requires paying full price for it. Once that's done, the gift recipient doesn't have to pay any fees, and can simply switch the device on their Verizon account. (It has to be unlocked and compatible with the Verizon network to work.)

With AT&T, customers in existing two-year contracts who are gifted new devices need to pay a $40 upgrade fee and then can continue under that same contract. They can also choose to switch to AT&T Next, which allows for upgrades every 12, 18, or 24 months, or go on a plan without an annual contract.

T-Mobile, which calls itself the "uncarrier," is unique for pushing plans with no annual service contracts. Because of that, T-Mobile users generally have to buy their devices outright. Depending on how much data you tend to use, this can actually end up saving money in the long-run. And if your friend/family member/other gift recipient is open to switching carriers, then T-Mobile is the way to go.

As part of its "contract freedom" model, T-Mobile pays off early termination fees (the charge to leave a contract prematurely) of up to $350 for people who switch from AT&T, Sprint, or Verizon and trade in their old devices. T-Mobile also says it guarantees the "best trade-in value" for devices. Verizon, by contrast, gives customers who switch from other carriers an account credit of $150, but charges a $35 fee to activate the new account and does not cover early termination fees. Like Verizon, AT&T gives customers who switch over a $150 credit but does not cover early termination fees either.

A few months ago, the folks over at Wired also compiled a helpful guide to breaking your phone contract without paying through the nose. Their recommendations include selling your plan, tracking changes in terms, finding a carrier like T-Mobile that will pay the early termination fee, and complaining your way out. Then again, these tricks are probably more helpful for personal use than for giving someone a holiday gift.

So when it comes to gifting a new phone, there really isn't an ideal solution to getting around those two-year contracts. Maybe you should give a rain check, and buy the device when the person's upgrade finally rolls around.

Alison Griswold is a Slate staff writer covering business and economics.