The Truth Behind Verizon's 'Free Phone' Initiative - Is It Worth It?

Businesses use a range of marketing tactics and principles, often backed by psychology, to encourage people to buy or use their products. Offering items for free is a marketing principle that implements the zero-price effect, which, according to Buyonomics, means people place an increased value on a product priced at zero. Despite the fact this shopping strategy can cost you, most consumers feel that when something is free, there's little risk attached to it meaning they don't need to do a cost-benefit analysis to decide if the item is worth buying. So when Verizon offers you a free phone, it might seem like a no-brainer. Who wouldn't want a brand-new Apple or Android phone for nothing?

Of course, savvy buyers will understand that Verizon's "free phone" initiative is a marketing gimmick, much like how retailers use odd-even pricing to influence consumer spending habits. So, before you rush out to your local Verizon store for a "free phone," it's crucial to know what you're really getting into before you sign on for the deal. Most notably, the free phone from Verizon is only available with stipulations that lock you into specific, typically higher-cost, phone plans for an extended period of time. Ultimately, whether or not this deal is worth it will come down to your own cost analysis, and what options you want and/or need out of your service provider. With that said, it could be worth using Warren Buffett's shopping advice to avoid wasting money, "Price is what you pay, value is what you get."

To qualify for the free phone from Verizon, you have to be a new customer or be trading in/upgrading your old Apple, Google, Samsung, or Motorola phone — which must have an active account in good standing at the time of your trade. The new phone you select can cost no more than $1,099.99, and you have to enroll in the Verizon's Unlimited Ultimate phone plan for a minimum of 36 months. The minimum monthly payment for this plan is $90, and you have to select the auto-pay option. Keep in mind the $90 minimum doesn't include taxes and fees, as these can vary by location.

Over the course of the 36-month term, Verizon applies a promo credit of $1,100 toward what you would normally be charged each month if you had purchased the phone and applied the payments to your account. The $90 monthly payment for 36 months comes out to $3,240, without taxes and fees. So, depending on what you pay now for your Verizon phone bill over a 36-month period, the deal may or may not be worth it to get the "free phone" portion of the offer. Also, once you sign up for this deal, you won't be able to switch plans for the duration of the 36 months. Plus, if at any time during your contract you no longer meet the requirements, the applied credit for the "free phone" ends, which could leave you on the hook for more than you bargained for.