From no-contract phones and family plans to pay-ahead plans, cell phone carriers make a lot of flashy offers. But which offers are genuine deals, and which are rip-offs concealed by smoke and mirrors? You can’t always trust what your cell phone company tells you. That’s why SuperMoney is here to help. We’ll teach you to read between the lines of cell phone carrier offers, to help you sidestep scams and find affordable plans.
1. AT&T Next, T-Mobile JUMP! & Verizon Edge may cost you in the long run
AT&T’s Next plan (similar to T-Mobile’s JUMP! and Verizon’s Edge) allows you to upgrade your phone early. Rather than waiting until your two-year contract is up to get the newest shiny iPhone, you can upgrade right away — ditching your contract altogether. Sound good? Before you get out your checkbook, let’s take a closer look.
Get savings now for a huge loss later
With AT&T Next, you pay for cell service ($15 per line, currently) and make monthly payments for the cell phone itself (unless you’ve brought your own). If in a year you want to upgrade your device, you can — but you’ll have to pay off the rest of your phone payments first.
Let’s say cell service costs $15/month per line, and your monthly payments for your phone cost $25/month. A year later, you will have paid $480 ($25 +$15 x 12) on your cell phone. If the retail price of your phone is $500, you’re ahead of the game.
But there’s a catch. To upgrade, you’ll have to trade in the phone you just spent a year paying off. In return, you get another device that you don’t really own — you’ll still have to make monthly payments for its full retail price. And in the process, you lose the resale value of your old phone.
If you don’t upgrade right away, the cost is even higher. Let’s say you wait a year and a half before trading up — paying $25 + $15 over 18 months, for a total of $720. Now you’re out the resale value of your old phone, and you’re paying more than retail price for your new one.
Also, some of these deals are temporary. The $15 per line charge is a special discount used to draw people to AT&T, and may jump to $40 the next time a new user wants to upgrade.
Conclusions: while AT&T Next may sound like a great deal up front, it can cost you far more in the long run. If you find yourself drawn to a similar plan, be sure to read the fine print and make sure the “savings” are worth it.
2. Bringing your own phone might not bring savings
Looking to sign up for a no-contract plan? We don’t blame you. One of our SuperMoney team members went from paying $260 a month to $120 a month by going that route, but here’s the catch. You may have to buy a new phone anyways. In spite of the catchy “bring your own phone” tagline, many phones are incompatible with no-contract carriers.
Many carriers’ websites offer plugins which allow you to search your phone’s serial number to confirm compatibility. However, don’t rely on these features: upon searching their serial numbers, SuperMoney writers have received error messages or even incorrect answers.
Conclusions: before heading in to the cell phone store, do your research. Google your phone’s make and model and the name of the carrier you’d like to switch to, and look for current search results. Has someone else tried to switch to this plan with the same phone as you? How did it work out for them?
3. Unlimited talk, text, and data (that’s actually limited)
Unlimited data would be an incredible offer — if it were true. Most plans allow a user 2.5GB of data per month. That will serve you fine if you use your phone to text and check your email, but if you like to watch Netflix on your phone, beware. Once you exceed your 2.5GB (“unlimited”) of data in a month, your limit drops down to 2GB. That means slower internet speeds, longer download times, and forget about streaming videos.
Conclusions: If it sounds too good to be true, it probably is. Make sure to find out the actual limits of your “unlimited” plan to avoid costs and penalties.
Mobile Hot Spots
Mobile hot spots let you bring your wifi with you. You’re given a small device to connect to, and viola – instant internet. For the most part, it works, but there’s a hidden catch: data limits. Even if there’s just one user on your network, streaming videos or playing on-line games will cause you to hit the data limit pretty quickly.
Of course, there’s always the option of buying more gigabytes, but data is expensive. You might be better off purchasing internet access through your local cable company.
Conclusions: These mobile hot spots work fine if you just need to check email or surf Facebook. But if you want to do more than that on a regular basis, you run the risk of running out of data before the end of your billing period.
4. Prepaid phones share the same towers as the rest of us
Most prepaid phone carriers are Mobile Virtual Network Operators (MVNO). This means that they lease cell phone towers from large cell phone providers like Verizon and T-Mobile. Before you commit to a prepaid phone carrier, you should research which towers they use.
For example, Straight Talk uses AT&T, T-Mobile and Verizon towers (to name a few), while GoPhone uses only the AT&T network. Make sure whichever plan you’re considering uses towers that offer enough coverage for your area and needs.
Prepaid Phone News is a great web site that offers a wealth of information and tips on prepaid cell phone plans. And just like coupons and promo codes, you can hunt down extra minutes for your prepaid phone on sites like TracfoneReviewer.
Conclusions: Before you choose your prepaid phone carrier, make sure they have cell phone towers in your area. If they don’t, you may find yourself needing to drive across town just to make a phone call.
Know how to ask for help
If you decide to make the jump and hit a roadblock, the most effective way of getting answers is through Facebook. Every carrier has a customer service team ready to answer questions and point you in the right direction, without having to wait on hold for hours.
Cutting your cell phone bill nowadays isn’t as easy as cutting the cable cord, especially with carriers making duplicitous offers. When switching to a no-contract service or ditching your contract, research everything.
Pamela is the author of thirty-eight romance novels with more coming out every year. She’s best known for her NASCAR romance novels, but writes non-fiction, too. Pamela’s a regular columnist for the American Quarter Horse “Journal” and writes for SuperMoney.com where she shares her personal finance tips on how to thrive in this economy.