Don’t Get Ripped Off series: The right way to buy a cell phone in the age of data charges

by Bob Sullivan on November 4, 2013

Citizens Utility Board of Illinois

Citizens Utility Board of Illinois

Shop for a cell phone these days, and you aren’t buying a cellphone plan. You really shouldn’t be buying a gadget, either.  Shop like you are first and foremost buying a data plan. Data will cost many of you $2,000-$3,000 during the next two years — a lot more than the priciest smartphone. Compare accordingly.

First, decide if you are a light, medium or heavy data user. That’s tricky — most folks move from less to more, as they discover apps that they can’t resist (mine is my SlingBox — I have to watch my hockey games away from home!). There are numerous ways to pick one of those buckets, but they are all imprecise. Here’s a healthy guideline from the Illinois Consumers Utility Board.  Know this: all carriers offer data plans so meager (300-500 Megs a month) that you should ignore.

Here’s my guidance: Light users who promise to never watch video on their phones can get away with 1 or 2 GB. Medium users who might watch 1-2 TV shows or games per month, or download a lot of email with attachments, need about 5 GB. I (and my hockey games), and my frequent use of tethering to get my laptop online, need 10 GB.

Beyond that, you should really use Wi-Fi more often.

While plenty of carriers say they offer unlimited data, almost every plan comes with asterisks now — even the consumer-friendly prepaid plans — so no one gets out of doing these unpleasant data guessing games. To keep things simple, I’ll compare only light and heavy plans.

  • T-Mobile has the cheapest data-hoarder plans of the large carriers. For $70 (plus fees) you get unlimited phone surfing, and you can tether (capped at 2.5 GB). For $60 (plus fees), you get 2.5 GB on the phone. For either price, you’ll also have to buy a phone or finance one for $100-$200 upfront and another $20-$30 monthly.
  • Verizon, which tends to have the best coverage, has the most expensive plan. You can’t really get a working Verizon smartphone plan for under $100 monthly. All Verizon smartphones now require a poorly-named “share-everything” plan, even if you are sharing the data only with yourself. The Verizon guys charge $40 per device, and $60 for 2 GB, for a total of $100 (plus fees). A 10 GB plan and phone costs $140.
  • AT&T’s plans are a pinch cheaper than Verizon’s. For example, a 2 GB plan costs $45 for the phone and $50 for data, or $95 total (plus taxes). A 10 GB plan costs $30 for the device plus $100 for data, or $130.
  • Sprint was the cheapest service until T-Mobile began offering a new set of plans. Sprint gets credit for simpler pricing models. Unlimited data costs $80, and you can add 5 GB of tethering for a total of $110.

 

RED TAPE WRESTLING TIPS

Do a two-year cost assessment. If you don’t bring your own phone, all these plans have various ways of representing the (very high) cost of the phone purchase. The best way to compare services is to sketch out the full cost of your commitment. For example, Sprint might give you a “free” iPhone 5c, but you’ll be locked in for two years at $80 per month. Total cost: $1,920 plus fees. T-Mobile’s $70 per month deal sounds appetizing, but an iPhone 5c costs $50 upfront plus $20 monthly financing, for a grand total of $2,210. The T-Mobile price does include some tethering, the flexibility of JUMP/insurance, however. And, if you bring your own phone, T-Mobile is less expensive.

Family plans. Given all the permutations possible with family plans, it’s very hard to generalize which is the cheapest. All carriers have different ways of tacking on per-phone charges, and most of them magically end up costing about the same. For example: Verizon charges $40 extra for each device, but allows family phones to share data. Get four phones and a 10 GB shared plan, and the cost is $260 (plus taxes). Shared data can be cheaper, but it also creates a great risk for overage charges. At Sprint, phones two, three and four cost $40, $30, and $20 extra, plus data costs. To get unlimited data on each device, the cost would be $80+$70+$60+50, or …. $260.  See how I did that? Here’s a good summary of family phone plan charges.

Discounts. Many carriers offer discounts for affiliations, such as an employer. If you aren’t getting one, stop reading right now and Google your employer name, your carrier name and discount. Many firms have negotiated generous 15%-25% breaks. Ten minutes’ work could easily save you $250 a year. Also, make sure you know how to quickly learn how much data you have used during the month. Many carriers let you switch data plans during the month. Remember — paying ahead of time is cheaper than paying after the fact. Paying attention (or even using phone software to warn you) can save you from bill shock later.

 

Bring your own device to a discount/pre-paid service – You can save money by thinking like a wireless carrier. Recall that early upgrade plans are funded in part by carriers recognizing the value of used smartphones? The 50% of Americans who now have smartphones should come to the same conclusion. Most 4G smartphones are good enough for most consumers to read email on the go, browse the Web and use basic apps. Once you’ve finished paying your contract dues, you are a free agent. Stay that way. Take your used phone and try a “bring your own device” plan from a carrier like Straight Talk. (T-Mobile offers a competitive plan, too). You’ll probably be able to turn your $100-a-month bill into a $50-a-month bill. Now that’s real money.

But note: These alternative carriers all ride along the networks owned by the big four, so the service is only as good as the coverage in your area. Also, these sellers don’t offer true unlimited service: Straight Talk, for example, throttles users down to painful 2G speeds if they use more than 2.5 GB in a month.

Read the rest of this story at Credit.com

Read about the ways T-Mobile’s new pricing is shaking up the cell phone market

The rest of the DON’T GET RIPPED OFF series.

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