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The most popular smartphones today like the iPhone and Droid Incredible 2 often have a $199 starting point with a two-year contract. With the iPhone, you can buy a brand new 3GS for $49 from AT&T with a two-year contract, but the reality is, that phone is two years old. For under $100 though, you can get a fresh Android device. Does it make sense?
With the iPhone 3GS, you know exactly what you are getting for that cheaper price. The phone was designed in 2008 and went on sale in 2009. It was designed as a high-end phone at the time. The iPhone 4 has a faster processor, better screen, higher resolution camera, and a few other goodies. The 3GS though is still a competent device even in 2011. There are millions of users with one that have upgraded to iOS 4 that are perfectly happy with the 3GS, as they should be.
A cheaper Android phone though may not be such a slam dunk. Unless you find a deal on a high-end model just as it is being phased out, an Android device under $100 may be that way due to cheaper components where cost and sales volume are the key considerations, not performance.
Most high-end Android devices run a chipset that supports ARMv7 whereas the cheaper phones use ARMv6. That means all other things being equal, a 600-MHz phone supporting the ARMv7 instruction set will run faster and smoother than one running ARMv6. The bottom line is, you cannot look at clock speed as a measure of performance. If you only want to browse the Web and check email it may not matter, but once you load a few games, you may regret the older architecture.
Screens are often the single most expensive component of a smartphone, so that will be the easiest way to cut corners. You'll be in for lower resolution screens that are smaller overall.
Smartphones are appealing to people not only for their capabilities but for their upgradability. The iPhone 3G launched in July of 2008 is capable of running iOS4 just like the iPhone 4. Not everything is supported, of course, simply because the 3G doesn't have the same hardware. But the phone is far more advanced today than it was when released.
You may not get a similar upgrade story when you buy a cheap phone. You should be content with the OS version that it comes with. Consider yourself fortunate if you get a major upgrade, something you are almost guaranteed with a high-end phone.
Check out the Tested article if you are still considering an economical Android phone. It will lay out the best phones in this price range on each of the major U.S. carriers. Happy hunting!