Even economists have a hard time understanding why cell phone companies charge what they do and, perhaps more importantly, why we pay it…all the while enduring spotty reception, abysmal customer service, and two-year service contracts.
Although the specifics of cell-phone pricing are intriguing and may remain a bit mysterious, the answer to the “why we pay” question really comes down to two points:
- We’re suckers for the latest and greatest gadgets (especially phones, which we can show off to all our friends), and we’ll pay anything to get them.
- We’re risk averse. We’re so afraid of going over our talk-time allowances one month and getting hit with a $200 cell phone bill that many of us are willing to pay $100 every month for unlimited talk time even if we only use, on average, 500 minutes.
How to Buck the Trend and Save on Cell Service
If you’re addicted to your iPhone or terrified of occasionally paying for your cell phone calls by the minute, this saving strategy might not be for you. But if you want to save $40 or more a month (that’s $480 or more a year), listen up.
Walk into any major wireless carrier store (AT&T, Verizon, T*Mobile, Sprint, etc.) and you can buy the coolest new phones for a fraction of their actual cost if sign a two-year service contract. In most cases, sales reps will try to sell you a plan that costs at least $70.
At AT&T, for example, you can currently get an iPhone 3GS for $199, but you’ll have to spend at least $70 a month on service (you’ll pay the mandatory $30 a month for a data plan and choose from voice plans that start around $40).
That’s $200 for the phone and at least $1,680 for the service contract over two years, regardless of how much you actually use the phone. (Obviously, you pay a premium for having the trendy iPhone, but the economics work out similarly with other handsets).
For the moment, let’s leave data out of the equation. A $40 voice plan with AT&T gets you 450 minutes. You can choose to add 200 text messages for $5 a month or unlimited messaging for $20 a month.
Don’t Talk Much? Save with Prepaid Phones
Let’s assume you use, on average, about 300 daytime minutes of airtime a month, receive 80 text messages and send 50 messages. With T*Mobile’s pay-as-you-go plan, you can buy 400 daytime minutes for $50. Outgoing texts cost $0.10 each and incoming messages are just $0.05 a piece.
So your talk time costs you $37.50 and your texts cost $10.50 for a total of $48.00. Less than had you signed up for an AT&T plan with unlimited messaging (which would’ve been $60), and just slightly more than the $45 you would pay for the AT&T plan with 200 messages.
So what’s the big deal? Well, imagine that you don’t actually use 300 daytime minutes every month. Say one month you only use 100. And you only send 40 text messages and receive 20. Your pay-as-you-go plan will only cost you $17.50 that month. If you’re a really light user and average about $20 on a prepaid cell plan, you’re looking at a savings of $25 a month or $600 over two years…all with no contract.
Looking Beyond Major Carriers
Granted, some people use their phones a lot more, or want to use data services like e-mail and Web browsing, so comprehensive plans start to look more attractive. But it’s still possible to save by:
- Buying an unlocked version of a phone that has been around for a couple of years from a site like Cell Hut, and
- Selecting a lesser-known carrier
There are more cell phone carriers out there than the big four. But what about coverage? Reliability? The big secret is that many of these “second” tier carriers are using the exact same towers and coverage networks. The little guys rent the airwaves from the big guys.
And they charge you a lot less.
For example, did you know that Walmart offers two very affordable nationwide plans through Straight Talk that have no contract? You can choose between:
- 1,000 minutes, 1,000 texts, and 30MB of mobile web access for $30 a month
- Or $45 a month for unlimited everything
Unlimited minutes, data, and text on AT&T currently costs about $130 a month. Savings with the Walmart unlimited plan? $2,040 over two years.
Typically, when Walmart competes on price, Walmart wins. That can sometimes be a bad thing, like when they drive small-town hardware stores and pharmacies out of business, but this time, I won’t be crying for the big wireless carriers.
Staying With a Major Carrier But Saving Anyway
Not a fan of either the prepaid or alternative carrier methods of saving on cell service? You may still be able to save on your cell bill and stay with AT&T, Verizon, Sprint, or T-Mobile.
BillShrink allows you to quickly search for and compare cell phones and plans across the four major carriers. If the best deal on a new phone and plan is more important than a getting a specific phone, but you want to stay with a major carrier, this may be the saving strategy for you.
What about you? How do you save on your cell phone service?