Why do you have to get a Tab Large Plan (79$+) to pay the 21$/mo for a phone?

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  • Updated 1 month ago
I just want to keep my current plan and pay the 21$ a month so I can get rid of the crap phone I have now. (like I did when I got the phone i have now)

But they make you get the large plans. At minimum 79$/month (plus tax, so ~89$ actually + tab comes out to about 113$), for less/comparable than I get on a cheaper plan? 

You just end up paying more in the long run. So why can't people opt to have a cheaper plan and pay more money for the phone per month. Ex: keep a 55/60$ plan and add 21$ per month to it. (I know someone who has a 40/50$ plan and pays the 21$/month). 

you end up paying about 650$ more for the plan, but you "save" like ~250$ on the phone. so you're really not saving anything?? Is it just a scam to get people to pay more because people don't do the math? 

Is this "just how they do things", is there a reason to it, because it actually makes no sense. 
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  • frustrated and confused.

Posted 3 months ago

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Allan, Mobile Master

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It's just how it done. I dont personally agree with it as people who need a tab large generally cant afford paying so much for a phone up front but then you make them pay more in the long run.

All the companies do it though so what are ya gonna do? :(

But yes. You have to change to a tab large plan to qualify for tab large.
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Dennis, Mobile Master

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Or get it on a Tab Medium
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Mark Berry

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I agree I have a great $55 plan and no tab balance, I want to get a phone and pay the tab large. If I have to go up to the tab large plan I would be paying $100 a month vs $75 if I could keep my current plan. I have 4 lines on my account surely there is some customer loyalty way of getting what I want?
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Johny Cash

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Getting what you want has a cost buddy..
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The tab is essentially an interest-free way of financing some or all of the purchase cost of your new phone, right?  Koodo eats the cost of the tab portion of your phone up front and then charges you back over your 24 months.  Doing this costs them money one way or another:  if they have enough cash on hand to cover it, then it costs them in interest they could have earned on that money by investing it instead of lending it to you; if they don't have enough cash on hand, then they need to borrow it there is a cost (interest charged to them) of borrowing that money.  This is why most loans or leases you get for just about anything have at least some interest charged to you, to first cover the cost of lending you that money, and then make some profit (because businesses are not charities, they are operating to produce a profit or else eventually run out of cash and investments and go under.

That's the simplified 10,000 foot level.  Now of course, Telus is making money on the plan amount you pay them every month, so you could argue that some of that could be going toward covering the cost of lending you money.  And yes, that's likely true and likely how they recoup those costs.  So thinking about tab sizes, as they go up, the company is lending you more money, which (a) costs them more money (see my first paragraph above for the ways it can cost them money), and (b) introducing higher risk should you default on that loan.  Higher risk = higher interest in most conventional lending.  Since the tab is effectively interest free, Telus needs to recoup the higher cost to them of lending you that larger amount of money as well as insulate them selves against the higher risk.  Hence, they ask you to choose a more expensive plan with a higher net profit to offset these additional costs and risks.

That was the 2,000 foot level.  I'm sure there's many more nuances to it such as the real cost to the carrier of purchasing the phones from the manufacturers in bulk and what the markup is, vs. promotions and activation credits that may errode some/all/more than that markup in some cases, etc.  But the bottom line is the higher the loan amount, the most cost to the lender, and more impact of default (higher risk level), so they are going to look to recoup those costs.

Sorry for this long lecture but it's important for you to understand why they ask you to get on a larger plan to get a larger tab.  Hopefully it makes sense, whether or not you like it.

The other option you could consider is looking at alternative ways of financing the phone.  If moving up to a tab large incurs you $X in extra costs vs. your current plan over the 24 months, and purchasing on tab includes $Y in activation credits/savings vs. buying the phone outright, then $X -$Y = $Z your net cost of borrowing.  See if there's another way to finance it for < $Z. 

You could try to get a small personal loan from your bank or credit union for 24 months and they will disclose to you up front the exact cost of borrowing.  If that number is < $Z, then take the loan and use the disbursed funds to buy your phone outright instead of through Koodo's tab.

Or if you think you can pay it off over the span of a few months rather than 24, it may actually be cheaper to put the outright purchase of the phone onto a credit card or line of credit and pay it off as quickly as you can.  It's a bit harder to estimate the actual cost but if you routinely already carry a balance, this is probably a poor choice since you it may take a long time to pay it off and you will incur those monthly interest charges for a long time.  
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Johny Cash

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Its never a scam if you know what the price is before signing up to it