&gt; Here (Europe) buying a pre-paid card and a phone separatly is the most cost effective option, isn&#x27;t it the same in the States?<p>Where in Europe? In the Netherlands all the calculations I ran every 2 years showed anywhere from slight to major discounts for 2 year contracts paired with a phone, and that&#x27;s without discounting future cash payments (or valuing money you&#x27;re paying upfront, either way).<p>It&#x27;s still beneficial to phone companies because it makes phones look cheaper than they actually are ($30 a month feels more doable than $720 upfront) and so it&#x27;s probably easier to sell a $30 a month cost for 2 years than selling a $720 cost even though (ignoring time value of money) they&#x27;re the same.<p>And then if you add say a $20 phone plan, it&#x27;s basically: want to pay $50 a month, or $30 a month and pay $720 now? The latter is probably easier to swallow for most and easier to sell, but that&#x27;s of course entirely different from being a scam.<p>So for example, the Netherlands. Apple&#x27;s shop sells the iphone for 700 euros. KPN (one of the 3 networks) has a one-time 53 euro, 2 year 54 euro plan, so 56 euros per month on average and the phone &amp; plan is included.<p>A similar plan with the same KPN is €32.50. Add that to the 700 euro cost of the phone over 24 months (€29) and you&#x27;re at 62 euros, vs 56 euros, more than 140 euros of discount and that&#x27;s without valuing the financial&#x2F;convenience value of not having to pay 700 euros upfront.<p>And this is literally the first, standard plan I looked into, no cherrypicking. (5gb a month plan, no limit calling&#x2F;texting). Perhaps you could find different results but I&#x27;ve, purely as part of my buying decisions when I bought my own phone, ran these calculations here about every year or every two years at different carriers and it&#x27;s consistent. So I&#x27;d say, it depends on the country.<p>As for prepaid, it&#x27;s absolutely horrible here in the Netherlands. It&#x27;s 30c per minute for calling, 16c per text, 25c per megabyte. Not kidding. That&#x27;s KPN by the way, the same that offers the above plans. That means if you call say 300 minutes per month, that&#x27;s 90 euros already. And that&#x27;s just a little over calling 1 hour per week. Call 30 minutes per week and it&#x27;s 36 euros. Add a 700 euro iPhone and you&#x27;re already well over any KPN plan you can get, and you haven&#x27;t used any data or texts yet. The 5 gigabytes of data the plan has would cost you 1250 euros per month if used in prepaid. Even using just 500 megabytes per month (my plan 5 years ago) would cost you 125 euros per month, prepaid.<p>KPN&#x27;s prepaid is disproportionately shitty though, it&#x27;s meant for old people really. Like my grandfather has it and he mostly just calls for cabs, emergencies etc. T-Mobile&#x27;s rate in the Netherlands is more sensible, but still 5c per megabyte. A 1 gigabyte monthly data usage still costs you 50 euros, but such a 1 gigabyte plan would cost you less than 20 euros with minutes included. Prepaid here is never, ever a good option, unless you&#x27;re an extremely light user like my grandfather, or someone who travels tons and doesn&#x27;t return (as you can freeze plans for vacations etc).