February 6th, 2008 
NCN
I recently upgraded my Dish Network satellite receiver. While he was installing the new receiver, the technician suggested that I look into the ‘annual discount’. Yesterday, I called Dish Network. Here’s the deal -
If you prepay for 11 months, you’ll receive 1 month of service for free.
This discount applies to your ‘programming package’ and does not apply to leasing fees, dvr fees, etc.
So, even if you prepay for a year, you’ll still get a monthly bill for miscellaneous fees.
The actual discount will vary, according the ‘programming package’ that you have.
In my case, my ‘programming package’ is $44.95 per month.
If I prepay, my annual cost will be $494.45, instead of $539.40.
This equals a discount of 8.33%.
I signed an 18-month contract, so I’ll be paying these fees, either way.
If I prepay, the entire $494.45 will be ‘gone’ and I will have received the discount.
If I do not prepay, I can keep the money in my savings account, earn about 4%, and I will not receive the discount.
So, what would you do? Is this a good deal, or not?
Posted in 
The comparison is only fair if you would be making the monthly payments out of that same savings account. Assuming that was the case, your options would be (n-540)+(.04n*12) versus (n-500)+(.04(n-500)*12)… or to simplify it even further, you’re basically trying to figure out if the interest on $540 over one year would equate to $40. I think the answer is going to be no, and I would say you’re better served by paying the lump sum and saving the $40.
However, that was assuming that you’re paying your bills out of the savings account. Odds are that you’re not. Therefore, my feeling is this:
You’re probably not earning anything on the money in the checking account from which you pay your bills. So now you’re talking about the difference between making a monthly payment from your bill paying account, versus pulling interest-earning money out of savings. You’re unlikely (most people are) to replace that earning power diligently, so in this case, I’m against doing it, because it’s never a good fiscal choice to reduce your assets for the purpose of increasing a liability.
To be honest, I think the amount of money being worried over is far too small to be worth the effort, but it’s a nice exercise in financial planning.
By paying monthly, you would earn about $10 over the course of the year (remember to reduce your amount in savings by $44.95 each month). So by prepaying, you are saving about $35.00. As long as you have the money handy, it makes sense to me.
This is a good deal, take it!
Also, keep in mind that unless you manage to somehow deduct your TV, the money you save by prepaying is after-tax money. If you put that money in a savings account, you have to turn around and take a 25-33% hit on the interest you got.
You are getting an after tax return of over 8% . A fixed return. Your pre tax return is going to be less than 4% in most on-line savings (ING, etc.) over the course of that time. If its no hardship today, do it.
Employing your capital to get 4% (savings account) is worse than 8%, all you sacrifice is the liquidity.
Its really just a great Certificate of Deposit, that happens to throw off Dish Network as interest.