Smart phone savings: Avoid long-term contracts

|
Ralph Orlowsk/Reuters/File
In this October 2012 file photo, models hold a Samsung 'Galaxy S3 mini' (R) phone and a 'Galaxy S3' phone during the mini's world premiere in Frankfurt. If your usage is low, avoid those long-term contracts and you’ll wind up money ahead, Hamm writes.

Cell phone companies want you to sign a contract. It’s just a fact of life when picking out a cellular deal.

It makes a lot of sense for the cell phone company. It locks in a revenue stream for them that persists for two years (and has a solid chance of being extended beyond that). The only way that stream can be interrupted is if someone pays an early termination fee, which can be sizeable.

For them, dangling a phone at a low price as an incentive to sign a contract is well worth it.

The problem with a contract is that you can’t easily leap to another provider if you’re locked into a contract. If another provider has much lower rates than your current provider, you’re either stuck with your current provider or you’re paying a big fat early termination fee. 

The solution is to avoid long-term contracts, but contract-free cell phone service isn’t for everyone. Here’s how to figure out if it’s right for you.

The first thing you need to do is study your actual cell usage. What do you actually use your phone for? Sit down with your last few bills and figure out how much on average you use your cell phone, then round up to the nearest 100 minutes. The lower your number is, the better off you’ll be with a no-contract service.

Also, do you use data services or text messages on your plan? If your use of these is minimal, then a non-contract plan might be better for you.

A perfect example of someone who should avoid a long-term contract is my parents. My parents send somewhere in the ballpark of 20 messages a month and use perhaps 200 minutes of calls per month.

They are perfect candidates for a pay-as-you-go cell phone plan.

The first step they should take is shopping around with pay-as-you-go providers. What does it cost for a month of their usage with Boost Mobile (which is actually Sprint) or Virgin Mobile? What about Tracfone or other pay-as-you-go providers?

If these providers can offer a lower cost-per-month, then it’s a no-brainer to switch to them. Not only are they saving money each month, they have the freedom to go elsewhere whenver there’s an even better offer with another provider.

Even if the prices are roughly equivalent, you’re better off without the contract simply because there’s no termination fees and there’s the freedom needed to switch elsewhere if there’s a better bargain.

Pay-as-you-go isn’t for everyone. You need to really understand what you’re actually using (if you’re a new cell user, starting with pay-as-you-go is a good way to start), but if your usage is low, avoid those long-term contracts and you’ll wind up money ahead.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Smart phone savings: Avoid long-term contracts
Read this article in
https://www.csmonitor.com/Business/The-Simple-Dollar/2012/1128/Smart-phone-savings-Avoid-long-term-contracts
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe