What will save you money: a pre-paid cellphone plan or a 1- to 2-year contract?
bySep 25th 2009 1:00PM
Two months ago, I moved into a new apartment and needed to cut the fat in my spending. Where did I trim first? The landline.
I know, I know, after discussing the benefits of the landline in a post earlier this year, one would think I'd never do away with it. Maybe I'll reconsider later on, but for now, saving an extra $30 a month is worth it.
Where I am NOT saving, I discovered, is in my cellphone use. My monthly bill skyrocketed as soon as I got rid of the landline since I now use it to conduct interviews and of course, there's the occasional one-hour wait for customer service to handle whatever gadget, credit card or travel-related problem I am having that week. Please note that I have a BlackBerry and so I also pay for Internet use.
My roommate chose a pre-paid phone plan since she's only staying in the U.S. for half a year and when I found out she was paying $50 for her unlimited calling, texting and data monthly plan, I got jealous.
"There must be a catch," I thought. "How could a pre-paid service be cheaper than a monthly, contract-based service? I thought I was getting a deal!"
So when the opportunity arrived, I did some research and discovered some shocking information.
Since my roommate got what sounded to me like a great deal for $50, I used that as my budget. Besides, 50 bucks seemed like an average price for a phone plan. And thus, I compared monthly plans at all major mobile carriers: Sprint Nextel, T-Mobile, Verizon, AT&T. Then, I looked at lesser-known companies: Boost Mobile, Cricket Wireless, MetroPCS, Virgin Mobile USA and PlatinumTel, and compared what they offer for the same amount of money.
Here's what I found:
Individual monthly phone plans on 1- and 2-year contracts
For $50 on a 1- or 2-year contract with major carriers, you get:
Sprint Nextel: The plan includes 450 anytime minutes, ulimited mobile to mobile, unlimited nights and weekends minutes, nationwide long distance, nationwide roaming, unlimited text messaging and unlimited walkie-talkie use (chirp chat). Data not included.
Verizon: If you don't want to talk on the phone, you can opt for the $50 data and e-mail plan for smartphones/BlackBerrys. Otherwise, here's what Verizon offers: nothing for $50, but for $40 you get 450 anytime minutes, unlimited Verizon mobile-to-mobile calling, unlimited nights and weekend minutes, nationwide long distance, nationwide roaming. For $10 more, you may send/receive 50 text messages as each text costs 20 cents.
T-Mobile: You may choose two plans: 1. 600 anytime minutes, unlimited nights and weekends minutes, nationwide long distance, unlimited nationwide calls to any five numbers you choose. No nationwide roaming, no data, no text-messaging included. 2. 1000 anytime minutes, unlimited nights and weekends minutes, nationwide long distance, nationwide roaming. Data and text-messaging not included.
AT&T: There's nothing for $50, but for $40, you could get 450 anytime minutes, 5000 nights and weekends minutes, unlimited mobile-to-mobile calling, nationwide long distance and nationwide roaming. For $10 more, you may add 1000 text messages to your plan. You do get rollover minutes; therefore, if you don't use all the minutes in one month, they get added on to the next month. Data not included.
Benefits of individual monthly phone plans on 1- and 2-year contracts:
1. You don't have to worry about adding money to your plan as your minutes and features never expire (unless you don't pay your phone bill, of course). Even if you have limited daytime minutes or do not have text-messaging or data added to the plan, you can always use the feature (if your phone permits), but will just have to pay additional fees.
2. Customers can score a free mobile phone or receive a large discount on a phone when purchasing a individual plan with a 1- or 2-year contract.
3. Often, when you find a better service option from a competitor (for the same amount of money), you may call your service provider and request additional perks or threaten to leave them for the said competitor. This only works, however, when your contract has ended. Since companies want to retain customers, they usually add features such as text-messaging, more daytime minutes, etc.
Caveats of individual phone plans with 1- and 2-year contracts:
1. If you wish to cease using their service and choose to break the contract with the aforementioned companies, you will incur a fee. With Sprint, it will cost $200, progressively reducing to $50 depending on how many months are left in the contract; with T-Mobile, it will cost $50 to $200, also depending on how many months remain on the contract; with AT&T, it will cost $175 (minus $5 for every month you honored the contract); and with Verizon, it will cost $175 (minus $5 for every month you honored the contract).
2. You're often paying more money for fewer options. (Read options offered by pre-paid service providers.)
Pre-paid monthly phone plans with no contract
For $50 on a pre-paid monthly service from smaller carriers, you get:
Virgin Mobile USA: Unlimited voice calling, unlimited nationwide long distance, unlimited nationwide roaming. No data or texting included. (Cool thing to note about the Virgin Mobile plans: They offer "Pink Slip Protection." It is a program that will waive up to three months of monthly charges if a Virgin Mobile customer becomes unemployed. However, this only works for those individuals who have been Virgin Mobile customers for at least two months on a monthly plan and then become unemployed. They have to be eligible for unemployment benefits within the next 12 months for the program to activate.)
Boost Mobile: Unlimited voice calling, unlimited nationwide long distance, unlimited data usage, unlimited text-messaging and unlimited walkie-talkie use (chirp chat).
MetroPCS: For $50, you can get: a $45, no-contract, monthly prepaid plan that includes unlimited voice calling, unlimited nationwide long distance, unlimited text-messaging, unlimited data. For $5 more, you get unlimited international calling, or you can choose to spend $5 for unlimited call forwarding. Nationwide roaming costs extra.
Cricket Wireless: Unlimited voice calling, unlimited nationwide long distance, unlimited text-messaging. No data and no nationwide roaming.
PlatinumTel: Unlimited voice calling, unlimited nationwide long distance, unlimited texting, nationwide roaming and 100 megabytes of high-speed 3G data.
Benefits of pre-paid monthly phone plans with no contract
1. With a pre-paid option, you are not bound by a monthly contract, and thus, will not incur any fees if you choose to stop using the service provider.
2. There are no credit checks. Those individuals with poor credit don't have to worry about not receiving mobile service as companies offering pre-paid services don't really care whether their customers are defaulting on payments or going into bankruptcy because...well, they're paying in advance.
Caveats of pre-paid monthly phone plans with no contract
1. Your minutes, texts, data use have an expiration date and if you forget to add more money to the service(s), you might find yourself stuck with no way to communicate with the outside world, and that's a problem you do not want to encounter in emergency situations.
2. You have to buy the phone from the pre-paid service provider (and many of them are quite outdated-looking, to be honest). Also, they don't offer BlackBerrys--and for BlackBerry users like me, that's a concern. There are, of course, ways around that, but those options are illegal, and we're not going to mention them here.
And the winner is...
Pre-paid phone service from smaller carriers like Boost Mobile and MetroPCS. There are no contracts, no credit checks and many recession-friendly options. Boost Mobile service reviews were much better than those for MetroPCS. Of course, since Boost Mobile and Virgin Mobile are divisions of Sprint Nextel and run on the nationwide Sprint Network while MetroPCS coverage is very limited. This information is not advertised, however.
Hmm, sneaky, Sprint Nextel, very sneaky.
Imagine my anger when I realized that I was paying $40 more for a monthly contract plan to the same pocket that my roommate pays $50! I pay $89.99 for the "Everything Data" plan for my BlackBerry and I had to enter a 2-year contract with Sprint in order to receive the plan and get a $200 discount on my $549 BlackBerry.
My plan includes 900 daytime minutes, unlimited nights (after 7 p.m.) and weekends, unlimited data, unlimited nationwide long distance, unlimited walkie-talkie use (even though my BlackBerry doesn't have that function), nationwide roaming and unlimited texting.
About two weeks ago, Sprint added a feature to my plan, which allows me (and others) to make unlimited calls to any mobile service user in the U.S. Since I spend approximately 1,800 daytime minutes on interviews,etc., and since Sprint charges 40 cents per each additional minute used beyond plan's allowance, my phone bill ALWAYS exceeds $90 and I pay $200 and up per month.
I can't do anything to change that unless I break the contract with Sprint, and even though I will save money in the long run, I don't want to spend the money on a new phone and pay a $150 fee for breaking the contract. Well, not yet, at least.