Ask 10 people the cheapest way to make long distance calls, and you'll get 20 different answers. The field is wide open, with calling cards, cell phone plans, Voice-over-Internet Protocol (VoIP) technology, and land lines all vying for dominance.
So who's really got the best deal for making long-distance calls? Let's compare them. Land Lines
This is the old-fashioned way to make long-distance calls, through your area's phone company. But everyone knows by now that your local phone company isn't likely to have the best rates.
Websites such as MyRatePlan.com and SaveOnPhones.com have search engines that compare long-distance rates. Typically, state-to-state calls will start at 7 to 9 cents per minute. For example, Credo charges 5¢ a minute on top of a monthly fee of $5.95, and it donates proceeds to charity. Verizon offers unlimited plans for all of the U.S. and Canada. These start at $48 per month. If you're talking for fewer than 500 minutes, though, most cell phone plans are cheaper.
Cell Phone Plans
The basic cell phone plan for a new subscriber costs about $40 per month; that gives you about 500 minutes, or 7.5 to 8.3 hours of talk time each month. Often, the best talk time deals are for evenings or weekends.
But then you've got to add taxes to that. Currently, the state with the highest cell phone taxes is New York, at almost 22% (making your bill around $51). If you really want to save, move to Nevada, where the tax doesn't even scratch 7% (and your monthly bill will be around $43).
Given 500 minutes, you'll be paying 10.2 cents a minute in New York and 8.6 cents in Nevada. That's a lot more than you have to -- you're paying for the convenience of the cell phone.
There are smart ways to work around this. For instance, you have an iPhone. Your sister has an iPhone. Because you're both AT&T customers, you can talk to each other for free. Ask the people you talk to often which cell phone plans they're on -- you can often avoid paying for "in network" calls that way which is great for calling friends and family. Obviously, not everyone can use this option for all their calls, however, which rules it out as a primary communication method.
If you don't make many long-distance calls, or if most of the people you call are included on your cell phone plan, consider dropping your land line long distance service entirely and using a pre-paid phone card for the few times you need to make long distance calls.
Once you call in using the card company's toll-free number, rates can be as low as 1 to 2 cents a minute. But be careful: Some cards maintain their low prices by rounding up the time of your call in their favor.
If you only talk for a few seconds, for instance, they'll charge you for three minutes. To minimize that damage, find one with "minute rounding" of just one or two minutes. Also look out for connection fees, maintenance fees (a fee deducted from your funds the longer you keep your card), and surcharges to call toll-free numbers. Read the fine print, and get a card without these charges. Some cards also have "carrier service fees" of 10% to 20%, but those are harder to avoid.
When all the fees are considered, count on calls costing you about 3 cents to 5 cents a minute for a reputable card. Then you're just paying for the costs of the calls.
Here's a smart tip: If you call a specific foreign country often, see if your city has a neighborhood popular with immigrants from there. The stores in that neighborhood are most likely to sell calling cards with the best rates for that specific country.
It's free! Except it's not.
You can make free voice or video calls to anyone else who has a Skype account. You can also buy credits that let you call land lines (non-Skype-connected phones), which is one of the ways this "free" service makes money. Doing that will cost you about 2 cents a minute inside the United States. Or you can get unlimited calls to regular phones in the U.S. and Canada using Skype for about $2.95 a month.
Even if you're just using Skype to call other Skype customers, it's still not free because you have to have a computer with a high-speed Internet connection. That connection costs most people about $30 a month. While you can use your computer for more than just Skype calls, you have to have it to talk.
Still, most Americans already have those things. And since many computers come with cameras and microphones these days, you may not have to buy anything else.
As long as you have a WiFi signal, you can also use Skype on an iPhone or iPod Touch without paying a cent to the phone company. Other applications can do the same thing -- Yahoo Messenger, for example, and Apple's iChat -- but Skype is becoming the global standard that people are likely to be familiar with regardless of their home country or operating system.
There's also something called VoIP, or Voice-over-Internet protocol. I call it Internet phone service for short. One of the biggest players in this arena is Vonage. Its starting rate is $18 per month for 500 minutes, or more than 8 hours of talk time. To make it unlimited, you'll have to pay $25 per month. That's about what you'd also pay for Net2Phone, a Vonage competitor.
To make Vonage work, you need a regular phone, a high-speed Internet connection and the Vonage Adapter, which will cost you a one-time price of about $79, though you can often get it free when you sign up. You don't even have to have your computer plugged in -- it uses the web connection, not the computer.
Internet phone service isn't perfect. For example, connections can be jittery, and they won't work if your Internet or your power is out (unlike an old-fashioned land line that doesn't require use of an outlet -- which means it will often work in a blackout because it draws power from the phone company's batteries). But you can travel with the device and use it wherever there's a high-speed web connection.
This little device uses the Internet to help you make calls, but it needs your computer in order to work. It plugs into the computer's USB port, then you plug your land-line phone into the MagicJack. After that, you can make unlimited calls.
MagicJack costs $40 for the first year, and then $20 a year after that, which breaks down to $3.33 a month for the first year (still more than Skype).
And there's a catch: Your bandwidth has to be pretty fast to make it work well. And even if you have fast bandwidth, you really have to stop any other online activity while you're on the phone -- no downloading, no surfing, no file sharing, really no anything as long as the conversation is going on.
And the conversations get choppy. Syllables get lost. The person you're talking to may have to keep asking you to repeat things. But if you can refrain from using any other bandwidth during your conversations, $40 isn't much to talk all the time, any time you want for 12 months.
Although you may experience the same choppy conversations with Skype that you do with MagicJack, it seems to be more reliable and t doesn't cost $40 per year. And as long as both parties are using Skype, it's totally free. But if one of you is on a regular phone, then that $40 is all you need to use something like MagicJack.
If you can convince everyone you know to move to Skype -- and you can keep from playing around on the Web while you're talking -- Skype is probably your best choice. And even if you call non-Skype numbers, you can get the rate down to 2 cents per minute. Skype has the added benefit of allowing you to use video cameras, too, which MagicJack doesn't.
Sorry, MagicJack. You may be just $40 a year, but you're still sound-only, and if we have to keep our hands off the computer while we talk on the phone, we might as well use Skype, which doesn't clutter up our desks.