Your Smartphone Bill vs. Your Budget
My 8-year-old daughter recently asked me how old I was when I got my first cell phone. She was horrified when I told her I was in college. Like any tech-savvy young person, being connected to the mobile world is normal for her. It’s necessary. Of course, the reason I was so “old” before I got a phone has nothing to do with parental permission or money. My parents, after all, bought me that first phone – to my total shock, might I add – for about $100. Then, they added me to their calling plan and I paid them every month. It cost about $10 per month.
We live in a much more “mobile-centered” world now. So, I must admit that we need to be connected in today’s society. I also must admit that my daughter is normal in her desires to fit in. On the other hand, as a money manager and budgeter-in-chief, I don’t want to think about what it means to add yet another member onto my “family” plan.
It’s enough to make me yearn for the days of payphones on every corner and collect calls.
Can You Save Money on Your Phone Bill?
From a strictly numbers standpoint, it really seems like that my $100+ monthly smartphone bill should represent an opportunity to cut the budget. Yet, while it is totally possible to save money on smartphone bills each month through smart choices, the formula for doing so is not universal. What you can save depends largely on who you are, where you are, and what you can afford now.
The first steps it exploring what options exist in 2016. Today, trying to save your family money on this necessity is about more than contracts vs. prepaid options. Not only is the smartphone plan market a lot more complicated than it was when I got that first Nokia handset, it’s more complicated than it was only a few years ago.
Understanding Your Smartphone Plan Options
When I first started researching smartphone money-saving options I figured there would be a lot of them. What I didn’t figure what how many or how often they change. On the surface, there are really two major choices:
- The “Big 4” mobile carriers – AT&T, Sprint, T-Mobile, and Verizon
- Smaller carriers providing “prepaid” options
Traditionally, the best way to save money on your mobile bill was through option #2. Though there were fewer phone choices and most carriers didn’t offer the newest models, prepaid phones could – literally – cut a mobile bill in half. And they still do.
However, when T-Mobile broke the barrier on 2-year contracts and all other carriers followed suit, choices changed. Now, working with the “Big 4” has become decidedly more complicated. It is no longer “all or nothing” contract or prepaid. Instead, current smartphone users have four major options when it comes to different mobile plans:
1. Traditional 2-Year Contracts
Only current Verizon customers even have this choice, but it does still exist. The big bonus of these plans was the option to get a subsidized next-gen smartphone. On a 2-year contract with Verizon, for example, the newest iPhone model cost about $100 and the model one before it was free. The appeal of these plans was the low-cost buy-in. However, the carriers made up their subsidies with an up charge on their service. As a result, traditionally,2-year contracts were the least cost-effective option long term.
2. No-Contract Installment Plans
This is what replaced the 2-year contract option among the Big 4. With a no-contract installment plan, users don’t receive a subsidy on their smartphone, but rather pay for it in installments or lease it from the carrier. At any time a customer can pay off their phone and they have the freedom to move from one carrier to the other without a breaking contract.
3. Fast-Upgrade Plans
This is the other major development from the Big 4 carriers. Fast Upgrade smartphone plans allow users who want to get the newest phone every year to do so without shelling out $600+ for it. This option does come with a contract – often broken down to 12, 18, and 24-month options – which has subsidies built in. Users pay off their phone in monthly payments throughout the contract period. They also have the option of trading the phone into the carrier at the end of their contract term or paying it off early.
4. Prepaid Virtual Carriers
Prepaid virtual carriers, or mobile virtual network operators (MVNOs) were and are the best way to save money on a smartphone plan as an individual user. Today, each of the four major networks operates its own prepaid carrier – Sprint owns Boost and Virgin. AT&T manages Cricket Wireless. T-Mobile has GoSmart and MetroPCS. Verizon, the lone wolf, simply offers its users a prepaid option. In addition, most other MVNOs operate on one of the four major networks, though not all of them reveal which ones those are.
The major benefit to prepaid carriers is the low-cost monthly operation. However, you must buy a phone outright from these carriers or bring an unlocked phone that works on their network – CDMA or GSM. In addition, the phones they offer are older and/or lesser-known models.
Saving Money on a Smartphone Contract
While the old rule of saving money through an older phone and a prepaid contract may still hold true, the subtleties of the different smartphone contracts available today have made the layers of savings available less clear. The most important takeaway here is to understand the sheer volume of options available before moving on to figuring out what works for you.
To help with that, next time, we will look at the factors that affect smartphone plan savings beyond the companies themselves.
