If you're on a postpaid plan with a major carrier like AT&T, Verizon, or T-Mobile, there's a good chance part of your monthly bill includes a device installment plan.
Your carrier may have framed this as a "free" phone that's paid for with 24 to 36 months of bill credits. The problem is that the device isn't actually free. Instead, your carrier is using that device deal to lock you into an expensive phone plan that probably has more data and features than you really need.
Using your tax refund, you can pay off your device installment plan and switch to a cheaper carrier, scoring you a much lower bill for the same coverage.
What your major carrier's "free phone" actually costs
Free phone bill credits from major carriers are real, but they come with an expensive condition: You must stay with the carrier's phone plan for the full installment term. Depending on the carrier, that could be from 24 to 36 months.
If you try to leave your plan early, the credits stop, and your carrier forces you to instantly pay whatever you still owe on the device. They know that most customers don't want to pay this lump sum, so it keeps them locked into their pricey postpaid plan for years.
For many customers, that plan includes more data and perks than they really need. The average customer only uses 10-15GB of data per month, but the major carrier plans that offer device deals can include 100GB allotments or even unlimited premium data.
You might be paying up to $100/month at a major carrier when your needs could be met with a $25/month plan from an MVNO.
Why your tax refund is the perfect tool for switching
If you want to switch to a cheaper plan, your current carrier will force you to instantly pay off your phone. That's where your tax refund comes in.
Using your tax refund to pay off the remaining installment balance allows you to request an unlock and take your phone to any compatible carrier you want.
Most device payoff balances fall somewhere in the $200 to $600 range, depending on where you are in your installment term. With the average 2026 tax refund at just over $2,000, you'd have more than enough to cover your device payoff and still have money left over to treat yourself to something else.
Once you're free of the installment, carriers like Visible and US Mobile offer unlimited plans starting at $25/month. These carriers have access to the exact same networks that the major carriers use, meaning you'll have the same coverage even if you switch.
If you leave Verizon's Unlimited Plus plan at $80/month and switch to the Visible plan for $25/month, that's a potential savings of $55/month—or $660/year—for the same coverage. Paying $400 today to unlock $660 in annual savings means your tax refund has more than paid for itself before the year is out. Plus, those savings will continue into the future if you stick with the cheaper plan.
How to pay off your device and switch carriers
The process of paying off your current phone and switching is easy:
- Check your remaining balance: Log into your carrier account or call customer service to find your current device payoff amount.
- Pay it off: You can do this in a lump sum through your online account (exactly the kind of one-time payment a tax refund is perfect for).
- Request an unlock: Once the balance is cleared, contact your carrier to unlock the device. They should send you a PIN to enter on your phone.
- Switch carriers: Check which of the major networks has the best coverage in your area, then find an MVNO running on that network for the best rate on a plan that meets your needs.
The bottom line
Paying off your phone and switching carriers is an easy way to save on your phone bill. It lets you leave a device plan that's costing you too much money and switch to something that actually fits your budget.
To save even more, you can also use part of your tax refund to join a prepaid annual plan. If your current phone is already paid off, you can also use your return to pay for an unlocked device upgrade with a cheaper carrier instead of signing up for a new installment plan.
Max McCaskill
Sr. Staff Writer
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