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Are 'no contract' wireless plans a good choice?

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If you're a gadget lover who always wants the latest smartphone or you want the flexibility of being able to switch to a new phone after a year, then you should consider a "no-contract" wireless plan.

Just be sure to read the fine print and compare costs of over time. A "no contract" plan is not necessarily cheaper than a standard contract.

AT&T is the latest, big wireless carrier to offer a "no contract" plan, starting July 26, which will allow you to upgrade your smartphone or tablet every year. T-Mobile recently announced a similar "no contract" plan.

Smaller carriers, including Boost, Metro PCS and Virgin Mobile, also have plans that do not require you to be locked into a typical two-year contract.

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The new AT&T Next plan allows you to upgrade your smart phone or tablet after 12 months. You don't have to put any money down and there are no activation, upgrade or finance fees. You must sign up for a monthly installment plan, which can range from $15 to $50 a month depending on the device. Then, after 12 payments, you can trade in your phone and upgrade to brand new one or keep using your old one and have no more payments after 20 months.

How do I know if a "no contract" plan is right for me?

It's important to compare the cost of the phone with a standard plan and the overall costs of an installment plan to figure out which is best for you. Also, keep in mind you'll generally have to pay an early termination fee for breaking a standard two-year contract.

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If you think you'll want to switch carriers or get a new phone in less than 24 months, calculate whether the cost of the phone plus that early termination fee would be more or less than the overall cost of the installment plan over that period of time.

Will AT&T's new "no-contract" plan save you money?

It really depends how long you intend to keep your phone. With the AT&T Next plan, a base model Apple iPhone 5 would require a monthly payment of $32.50. Over a 12-month period, you'd pay $390 for the cost of the phone.

Under a traditional AT&T two-year contract plan, the same device would cost about $200 upfront. So you're actually paying more for the phone under the "no contract" plan. But you do have the flexibility to switch to a new phone after a year. Plus, you don't have to worry about getting hit with an early termination fee. At AT&T, the early termination fee is $325, though it goes down $10 for each completed month of your two-year contract.

—By CNBC's Sharon Epperson. Follow her on Twitter @sharon_epperson

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