Cell Phone Plans 101

Read the Fine Print before Making a Two-Year, Four-Figure Commitment

Cell Phone Plans 101
August 6, 2014

The four primary providers of cell phone service – AT&T, Verizon, Sprint and T-Mobile – are constantly revising and updating their plans in order to retain their existing customers and entice new ones. In general, they tend to make it difficult to compare plans directly and will strategically emphasize the benefits of their own plans.

Fortunately, you can find comparisons online – among other places, Consumer Reports did a recent comparison of plans. However, the only way to tell if a plan is truly right for you is to slog through the fine print to consider the situations that you may encounter.

Here's the general path to take when evaluating plans:

  • Define Your Needs – Don't be talked into an extra phone or anything you don't need just to take advantage of a deal. Consider the monthly data package you are likely to need based on the amount of data you use – Netflix use and high-volume streaming might require higher level plans, but basic 2GB sharing plans work for most.

  • Balance Phone Costs With Service Costs – Many of the newer, lower rates being discussed do not take into account the cost of the phone, hoping you will not notice until after you sign a contract.

    Several companies are offering plans that are independent of the phone cost, or instead prorate the full cost of the phone over several years. That is full cost (often $400-$700 for smartphones), as opposed to the $99-$199 subsidized phone that was prevalent in previous contracts – less if you were willing to accept an older phone.

    AT&T's version of this gambit on their website. AT&T is attempting to switch people from subsidized phone and grandfathered unlimited plans into their Mobile Share or Next program.

    Switching from one of the old subsidized phone plans results in significant savings in the short term, but buried in the fine print is the notice that upon the next upgrade, the subsidized phone is no longer available with the per phone discount. You can buy the next phone at full price, or prorate it over several years, but either way you are paying full price for the phone or losing a discount – negating much of your savings. Make sure you don't miss any of your monthly payments. Late payments can hurt your credit for years to come. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

  • Consider Additions, Overages and Upgrades – Plans with the lowest number of minutes are not always the cheapest when all other fees and situations are considered. For example, the per-phone pricing with AT&T drops when you reach the 10GB plan level, and with exactly two smartphones on the plan 10MB costs exactly the same as 6MB.

    Overage charges will vary in the incremental amount of data added (1 GB is common) and the corresponding costs, so it is worth your time to find the optimum. For example, a 2GB plan from AT&T costs $40 with $15/GB overage and a 4GB plan costs $70 with the same overage. If you fluctuate between 1-3 GB data usage, you are better off buying the 2GB plan and paying the occasional overage cost.

Take your time and don't act until you have a full understanding of all comparisons. Put employees of one vendor on the spot asking them to explain the weak points of somebody else's plan, or use your knowledge of somebody else's plan to go over the weak points of theirs. After a few rounds of back-and-forth, it should be evident which vendor and plans you are comfortable with, and you can select a plan that meets your needs.

And again – always read all of the fine print. When it comes to researching cell phone plans, don't phone it in! If you want more credit for your new cell phone or data plan, check out MoneyTips' list of credit card offers.

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