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Are You Paying Too Much For Your Phone? The Genius Savings Strategies The Carriers Don’t Want You To Know

Chances are good that you’re paying too much for your mobile phone. With some savvy, you can learn to compare mobile carriers and snag big monthly savings with the right phone (and plan) for your needs.


Comparing the cost of mobile plans isn't easy, but finding the right plan could save you a bundle.It’s official, oh lovers of mobile: Choosing the cheapest cell phone plan is a headache.

That was the headline of a piece CNN Money ran in February, and in it writer Adrian Covert sums up the complexities brilliantly: “Finding the wireless plan that offers the best value is enough to give even the savviest cell phone customer a migraine,” he writes. “Why all the different billing options? All the carriers essentially offer the same network technology and services now.”

Yes, but they’re also throwing all sorts of wrinkles at you that make it brutally hard to compare one company’s plan straight up against another. Over the winter, I was all but sold on switching over from AT&T to T-Mobile, until I discovered that T-Mobile would make me pay full-price for an iPhone 5S, either upfront or over a period of up to two years.

Sorting out which plan is best for you involves a lot of homework. But your major expenses will boil down to the phone you select and the plan that goes with it. This week I want to offer some tips that will help you approach the cell phone billing pickle from another angle: Have you stopped to consider what your cell phone needs truly are? What are you paying for and how much do you truly need?

For me, the story begins with the reason why I was set on switching from AT&T to T-Mobile in the first place. You see, it wasn’t so much about switch companies as it was plans and features.

I was attending a business meeting in a bank conference room without WiFi, when one of the attendees whipped out his iPhone and said, “Here, use this as a personal hotspot.”

Huh?

I had an iPhone 4S, a pretty up-to-date device. Why couldn’t I do that?

My friend explained to me that his phone plan, with T-Mobile, allowed him to use the phone as a hotspot, meaning he could get WiFi reception for his computer via the phone whenever he needed it. This baffled me, because I had been grandfathered in years ago under AT&T’s unlimited talk, text and data plan. (The cell provider ended such plans in 2010.) Shouldn’t that include all the bells and whistles?

As it turned out, no.

When I called up AT&T—initially to cancel my cell phone plan and make the switch—the customer service rep told me that I could not use my phone as a personal hotspot because I had unlimited data streaming. But then she explained to me that I could get this feature if I switched to a capped data plan.

Here’s where some strategy comes into play, and where I hope to pass on some savvy to you: For me, having a personal hotspot on my phone is far, far more important than being able to stream all the music and video in the world. In fact, I rarely use my phone to do either, except for jazz radio at home. And that’s easy enough to do through a standard WiFi connection that doesn’t eat data.

As an itinerant journalist, I work at lots of coffeeshops and remote locations where the Wifi can be spotty, or even non-existent. Getting my own wireless signal on demand, especially on deadline, represents a huge perk.

The rep and I went back over six months of phone bills and discovered that my wife and I had rarely used more than 5GB of data in any month. So I opted for a 6GB plan, reduced the bills on our phones by $40 a month total, and turned both phones into wireless hubs. Sweet!

That may not sound like a huge deal, but I have quite a few tech-savvy friends who aren’t hip to the whole wireless hotspot thing, and they’ve regarded this move with envy. What’s more, AT&T sends me text messages if I’m in danger of going over 6GB. If I do, they bill me an extra $15 a month for n added 1GB of shared data. (It hasn’t happened yet.)

I highly, highly suggest that if you’re not a big data junkie—that is, not streaming tons of cellular video and audio though your smartphone or tablet—that you should take a look at your cell phone plan and see how much data you use as opposed to what you pay for. Cell phones are expensive tools and there’s no sense paying for something you don’t use; your carrier should be able to easily tell you how much data you use each month.

And if you’re frugal to the point of just needing a phone for the basics, there are other avenues to consider, though both have their potential pitfalls.

One popular option right now is the StraightTalk plan offered through WalMart. It’s a month-to-month wireless service that contracts through major carriers, and the price is limited to $45 per month offers unlimited minutes and voice. For many consumers, that’s just too good to pass up—but it may only prove cost effective if you’re a light data user.

StraightTalk’s data usage (listed in very small print) has an effective 2.5 GB cap on it, after which point throttling takes place—and some consumers have companied that the actual data you get is more between 1.5 and 2.5 GB per month.

Or you could just go off the cellular carrier grid entirely. If you have a data-only plan, you can hook into Google Voice through a device such as an iPad or iPod Touch. In this blog, the interactive designer Pablo Defendini describes how he does it, using a portable wireless hotspot from Karma to make phone calls. In the first six months after leaping off the wireless gravy train last year, he spent $28 total on expenses related to phone calls, and $100 for his hotspot. That’s it. About the only drawback, he says, is that he can’t make 911 calls from his phone.

His plan may not be the easiest to execute, even if you’re tech savvy. And for many smartphone users, going to a service like StraightTalk may prove too constricting. Regardless, you’re not going to know whether you’re paying way too much for your phone and your cell service unless you take the time to consider your needs versus your wants.

Too often, that’s the crux of the matter, whether were talking phones or anything else with a high price. In the rush to switch my phone service to another carrier, I thought it would also be cool to upgrade to an iPhone 5S. But those phones don’t come cheap, ever. Staying with AT&T, I still have the option of subsidizing a 64GB phone for $399.99 if I wait until mid-May, as opposed to the $849 full price.

Ah, but I don’t call that a screaming bargain, nor do I expect those subsidy salad days to last forever. AT&T chief Randall Stephenson has all but called for an end to subsidies for big-ticket smartphones. I assume they’ll be replaced by something else. But whatever it is, don’t count on it being cheap.

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About Lou Carlozo

Based in Chicago, Lou Carlozo is a personal finance contributor for Reuters Money, a columnist with DealNews.com, and a former managing editor at AOL's WalletPop.com. Contact him with story ideas for Money Under 30 at feedbacker@aol.com, or follow him via LinkedIn and Twitter (@LouCarlozo63).

Comments

  1. Lou, don’t forget to check out Republic Wireless. I dumped big red for them last month and have been very pleased. I plan to publish my 30-day review later this week. They have WiFi only plans starting at $5/mo. https://republicwireless.com

  2. I second the recommendation for Republic Wireless. I have been using them now for about a year and am very happy. When friends hear about my $10-25/month unlimited plan they almost laugh in disbelief, given that they are paying 4-10 times that. Republic Wireless uses Moto X or Moto G phones that they have customized to use WiFi calling and data when you are at home in your own Wifi network, and then uses Sprints network for calls/texts/data when you aren’t in a WiFi zone. The cheapest plan is $5 a month, but only provides WiFi calling service. The $10 a month plan provides unlimited talk and text on the Sprint network, and unlimited talk/text/data when you are on WiFi. The $25/mo plan is unlimited talk/text/data on WiFi and Sprint 3G. The $40/mo plan is unlimited talk/text/data on WiFi and Sprint 4G. You can switch plans up to twice a month from the phone, so only have to pay for the more expensive plans with data outside WiFi when you know your going to need it.

  3. I also recently switched to republic wireless. The upfront cost of the phone was higher than my last plan, (Net 10) but the coverage is comparable and I love unlimited everything for $25/month. The $5 Wi-fi-only plan is great, but not practical for me. This year I’ll break even with cell phone cost as my last plan, but next year I’ll save $550 (keeping same phone.)