How to Save Money on Your Cell Phone

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:

  1. Buying an unlocked version of a phone that has been around for a couple of years from a site like Cell Hut, and
  2. 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?

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


  1. I’m seriously looking into a prepaid phone or just dropping my cell altogether. I hate feeling like I have an electronic leash! ;)

  2. Good post!

    Smart to point out the savings with Straight Talk, too. They really add up!

    For people interested in the selection of phones, please visit

    You’ll see the full array of Straight Talk phones, recently updated!

  3. I think I’m already saving as much money as possible. My cell phone was free with a two-year Verizon contract, I’m already on the lowest minutes plan (and use most of them), and have unlimited texting (do lots of text-messaging). I don’t need the fanciest phone or a data plan, so I keep it simple.

  4. Don’t forget that many cell phone providers offer public sector/military or large corporation employment discounts. Talk with the sales clerk to see if you qualify for any additional discounts.

    My wife and I save 15% each month with AT&T, because of where we work.

    -Dan Malone-

  5. I have Straight Talk. I previously had Verizon then switched to AT&T but the bills were CRAZY!.

    When I heard about Straight Talk I couldn’t believe it but got it from Walmart and have had it now for 2 months and it is just sick! I’d heard that it was on Verizon and the coverage is rock steady, so yeah!

  6. I also have Straight Talk and I love the savings and finally be being on the strong and dependable Verizon network. Their $45 unlimited use plan is a real money saver for me – I have $50 more a month and I have the potential to save more than $600 a year versus my previous carrier. Even their selection of cell phones are affordable and without the threat contracts – I recommend the Samsung Finesse as a really cool Smart Phone with IPhone like features. Its so great to actually use my cell phone and not worry about overage fees – thanks Straight Talk for that!

  7. All of my customers love straighttalk so far. I too would recommend for anyone looking for a bargain on unlimited talk and text.

  8. Sam Soong says:

    Great post!

    I’ve been looking for ways to economize and when my cell contract was up, I got a Net10 phone. I pay 10¢ a minute and 3¢ for texts. It’s a terrific value and there’s no contract or overages.

    Check it out! You can get ‘em online at or at Target, Walmart, Best Buy etc.

  9. I think that locked cell phones that carriers offer nowadays are a big scam. When you subscribe a contract you will pay so much in a long term.

  10. I switched to prepaid also! I got a TracFone and love the money I am saving. There was NO contract and No monthly fees! For only $20 i got an airtime card that gave me 60 mins of talk time. Plus, Nationwide U.S. and international calls to 60 destinations are the same price as a local call with my TracFone.

  11. In today’s day there is no need to by a locked phone while locking yourself into a contract. With the internet it is easy to find an unlocked phone without any contract.

  12. I saved with prepaid and it has been awesome. I switched to Net10 where I pay 10¢ a minute and texting is only 5¢ a minute with no daily or monthly fees, roaming charges, activation or cancellation fees. Switching has saved me so much money and I couldn’t be happier.

  13. I have a bit of a dilemma right here. I would like to purchase myself a decent phone and cannot decide on which one to select. First of all, i am considering the Samsung Blackjack i607, which my buddy has. It appears pretty durable, and everything seemed good, but then i started looking at other phones. Now my biggest dilemma is choosing between the Nokia 5070 and the Samsung i900 Omnia. Any advice is welcome.

  14. Trim your texting packages down to something like 100 texts per month is a good way to save. Also, don’t go for over the top data packages — use your laptop or desktop computer to access the internet instead