If you are shopping around for cellular service you may notice some of the deals offer a free cell phone. A free cell phone is sometimes offered as an incentive when you sign up for service with a particular provider or renew a contract with your current cellular service provider.

Almost all cellular service providers offer at least one phone at no charge when signing a contract for cellular service. Many providers offer customer a choice of free phones, featuring different makes and brands. However, you must consider a “free phone” may not exactly be “free.”

When you get the free phone, you are agreeing to keep the cellular service from this particular provider for a specific amount of time. If you break the contract by deciding to end service with that provider before the contract expires, you will be charged a break fee. The break fee will be used to recoup the actual cost of the phone because the cellular service provider does have to purchase the phones from the manufacturer.

Also if you lose your phone and do not have insurance to cover the loss, you will have to either pay full price to replace the phone or pay a break fee to end the contract. If you are lucky, you may be able to find a replacement phone at a discounted price to finish out the contract.

How can a cellular service company afford to offer a free cell phone? They make money by providing you cellular service. You pay for making and receiving calls, sending text messages or photographs, or accessing the Internet, depending on the type of cell phone and what type of service plan you have selected.

Offering a free cell phone as an incentive for a customer to sign up for service is no different than stores offering discount prices or having sales. The free cell phone is a device to get a new customer or retain a current customer.