NEW YORK (AP) -- T-Mobile USA swept away its old phone plans over the weekend in favor of Simple Choice, which does away with traditional service contracts but introduces installment plans for phone buyers. Here are some questions and answers about the revamp.
Q: How does this help me?
A: It makes it easier to understand the cost of buying a phone and cancelling service. Basically, you know you'll be paying off the phone over two years, even if you leave T-Mobile. There's no early termination fee, and you don't have to wait to be eligible for a new phone at a discounted price. Also, once you've paid off your phone, your monthly bill declines.
Q: Is it any cheaper?
A: Sort of. T-Mobile's service plans are relatively cheap, and at least in the case of the iPhone, it's not charging that much for the phone. The full price for the 16-gigabyte iPhone 5 is $580, compared with $650 at the other carriers. On the installment plan, you pay $100 down and $20 per month for two years. T-Mobile has been undercutting the bigger carriers for a while, and this is a continuation of that strategy.
Q: Do I still need to pass a credit check?
A: Yes, if you want to get the phone on an installment plan. If you fail, you have to pay the full price up front. You also need to pay in advance for monthly service — the so-called prepaid option — while those who pass a credit check can sign up for monthly billing.
Q: Do I pay interest on the installment plan?
A: No, T-Mobile is basically extending interest-free financing on phones.
Q: Can I buy a phone on an installment plan and move it over to another carrier?
A: No, the phones are "locked" to T-Mobile until you pay them off. You can pay off the phone early with no penalty if you like.
Q: What kind of data plans do they offer?
A: T-Mobile likes to say that all of its plans offer "unlimited" data, but they'll slow down drastically once your phone hits a certain level of usage in its billing cycle. For the basic, $50-per-month service plan, that limit is at 500 megabytes — enough for a frugal smartphone user. For another $10 per month, they give you 2.5 gigabytes. If you add $20 instead, you get true unlimited data service.
Q: Sounds great. What's the downside?
A: T-Mobile's data network coverage is poorer in rural areas. It's the last of the four major carriers to build out an LTE network, which offers higher data capacities and speeds. T-Mobile also doesn't have access to lower frequency bands that help Verizon and AT&T with indoor coverage.