I understand that this post has a lot of information, and if you'd like you can skip to the "Bottom Line" section at the bottom for the synopsis, but I encourage you to read through it. After all, a well informed customer is the scariest of all to a services company and keeps you holding onto your hard earned dollars more often than you end up letting them go.
Cell Phones
First, we're going to talk about Cell Phones. They are a device that 10 years ago not everyone had, but with the rise of the smartphone and texting have become one of the hottest and most popular thing for retailers to sell. You can get them from your wireless carrier stores, Wal-Mart, Target, Best Buy, Radio Shack, that shady guy on the subway (although, you probably shouldn't), etc. As a result, people have even cut their old-school land lines and moved exclusively to using cell phones for their means of communication. Yes, the cell phone is a revolutionary and amazing technology that has become so integrated into our lives, the idea of not having one is painful for most. I mean, what if someone posted something to Facebook, Twitter, Instagram, or Pinterest and you didn't see it?!?!?! The horror! I jest a bit, but we all know its true. We are tied to the things like an extra arm. However, like when you stub your toe, it also can be painful at times too. I'm talking, of course, metaphorically and referring to the monthly subscription costs we pay to keep them. Some people pay upwards of $150-300 or more for their cell phone subscription or subscriptions, in the world of family share plans. Well, today I'm here to tell you that you don't need to pay that much for your cell phone. And, the best part? You don't have to sacrifice pretty much anything to get that bill cheaper. In fact, you might even find yourself with a newer, spiffier cell phone as a result. How? One word. Prepaid.
A Brief History of Prepaid Wireless and the Misconceptions Surrounding It
I know what you're thinking. Prepaid? Yuck. You mean those crappy Tracfone things that parents get their kids for their first cell phone that costs $100 for a 300 minute card or something ridiculous and comes with the cheapest piece of crap plastic phone that somebody in China probably built for a couple of pennies?
No. I'm not talking about that kind of prepaid. Although, admittedly, that's probably the first thing people think a majority of the time. They think crappy service, crappy cell phone that only works with said crappy service, and almost no savings. Well, I'm here to tell you that you've been looking at the wrong kind of prepaid, my friend. You've been looking at the kind you buy cards from your local gas station and these are, no doubt, junk. In fact, whenever I think of them, my mind goes to Subway Guy that wants to sell you the iPhone 6 for $50, 6 months before it comes out. Because, ya know, he's a nice guy like that.
How Contracts Feed on Your Wants
Prepaid has come a long way since cell phones have been around. In fact, in many places around the world, Prepaid wireless is the only way anybody goes. After all, the concept is awesome. You pay per month and have no contract. Sounds pretty good, right? Well, it is. In fact, its pretty darn awesome. Especially for a tech enthusiastic like myself. I'll admit it, I'd change and upgrade my cell phone like I would change my underwear, if I could get away with it. I'm not alone, either. The idea of a 24 months contract commitment is downright painful to even think about. Probably why most carriers tend to train their representatives to steer away from that little tidbit as much as possible. Regardless, though, we will sign the contract and lock ourselves into a carrier's service for 2 years, because we block that part out of our brains. In fact, all we can think about is that shiny new toy that they're offering us for $99 that we're practically foaming at the mouth to get our hands on and call ours. iPhone 5, Samsung Galaxy S4, HTC One.......the list goes on and on with the latest tantalizing tech gizmo and gadgets that are coming out. And that's not necessarily a bad thing. Lots of devices and competition means better devices. However, with everyone trying to one-up everyone else, that also means there are new ones coming out all the time with bigger and better features. That means that around month 6 of our 24 month contract, our cell phone we used to be absolutely enthralled with is old news. So, what do we want to do? Upgrade, of course! So, we call our carrier and they tell us "We're sorry, but you're not eligible for an upgrade until X number of months before your contract is up. You can, however, buy a new phone for the low, low price of.......wait for it......a bazillion dollars!". That's, of course, exaggerated a little bit, but you get the idea. My point is, around month 12 of your contract, you're painfully behind the times and hate yourself for locking yourself into a contract. You quickly forget this, however, when month 21-ish rolls around and you're eligible for upgrade, to which you promptly lock yourself into ANOTHER. DANG. CONTRACT. Welcome to the world of America's Instant-gratification society and why carriers have so much money for advertising those spiffy phones to you.
Freedom through Prepaid
At this point, you're probably pretty depressed, because you're "that guy or girl" in month 8 of 24. Well, I'm here to tell you how to break that painful cycle you've gotten yourself into. Enter prepaid. The truth is, prepaid has come a long way. Would you believe me if I told you I get unlimited talk, text, and data on my 4G smartphone for just $45 a month, plus tax? Of course you wouldn't. What kind of crazy talk is this? Well, its true. Well, I must have some crappy cell service provider that doesn't have almost any coverage at all. Nope. I have ATT service with nationwide coverage. And, for $15 more a month, I can even travel overseas with my unlimited plan. Well, what about your cell phone? I have a Galaxy Nexus, Google's last generation top-of-the-line smartphone. Granted, its not the newest, but my wife pays the same amount per month and DOES have the latest and greatest, the Nexus 4. Its just because I only bought the phone 6 months ago and don't want to cough up the money to buy a new phone quite yet. Trust me, I'm looking though. We did, after all, just establish that I'm a tech enthusiast and get a 6 month itch, right? But I digress.
So, how is this possible? Well, I use a service called Straight Talk, which is a sub-company to Tracfone Wireless. You mean that crappy $100 for 300 minute company? Not exactly. These guys are a little different. They sell you a SIM card for a $10 one time fee, which is a little card you put inside your phone, and they hook up your existing phone that you already own with service. You just pay the monthly fee. And their service only costs $45 a month plus tax. And, as I already mentioned, its unlimited everything. That means you can talk, text, and surf to your heart's content. And the greatest part? You even can tether your phone. FOR FREE! That's right. You don't have to pay extra for a tethering plan either. You can turn your phone into a wired tether or wireless hotspot without paying anything extra.
Why Contracts Cost So Dang Much Without Any Better Service Than Prepaid
At this point, you're probably wondering why you've never heard of Straight Talk or how you can get the same service as ATT through them. Well, I'm going to break down how this works. First, why they cost a bunch.
Contracted plans cost a lot for two reasons. Reason number one: Advertising. Cell phone companies like ATT, Verizon, and Sprint spend a LOT of money on their advertising. How much? To the tune of around $2.5 billion a year-ish per carrier. Seriously. BILLIONS. And its always growing. In fact, year over year, carriers advertising budgets have grown.
That expensive contract starting to make sense now? Well, there is another reason why contracted cell phones cost so dang much. Subsidization. Subsid-what? Well, that phone you bought for around $50-200 or got "free" with an upgrade, depending on its value, isn't actually free or that cheap. I mean, you don't think carriers are a charity, do you? They didn't get that much money for advertising from giving stuff away, after all. Just look at your bill again. It'll all come back to you. The truth is carriers use a technique specifically designed to pull you in and feed on your "want it now" mentality called subsidizing. It means that they take an initial loss on selling you a spiffy phone so that they can make it back on you over the course of that piece of paper you signed saying you'll stay for two years. In fact, many cell phones that are the latest and greatest cost around $600-800 to buy them outright. Carriers know, however, that if you sign a contract that you can't break without an early termination fee and they'll make all that money back. If you can pay $45 a month on Straight Talk, for example, and you pay $120 a month for the same service with tethering on Verizon, doing the math, over the course of 24 months at $75 a month difference actually made you pay $1800 for that phone. Doesn't seem like such a great deal at $99 anymore, does it? Heck, even free sucks when you put in perspective, which is something you thought you'd never hear in a sentence. I mean, free can't be bad, right? Well, like your mama always said, "Free isn't usually really free". Not to mention, that phone didn't really cost them $600-800 to get. It probably cost them two-third of that much to manufacture and get to the store, so they're making even more of a killing on you.
Transitioning Away from the Contract
So, after all of my wordy explanations, lets get to the part about actually pulling the trigger on this. First of all, how much work goes into this depends on who your carrier is, what you want for a cell phone, and others. However, the good part is that after this little bit of work, you never have to do it again. So, bear with me and keep your eyes on that sweet, sweet savings.
First thing to think about is your current carrier versus who you're moving to for prepaid. For ATT and T-Mobile users, you're looking at almost no work at all. It could literally be as easy as dropping a new SIM card in your phone and moving over your number. However, if you're a Verizon or Sprint customer, you can still pull it off, but it'll probably require a tad bit more work for you. Not much, mind you, but a bit. If you're an ATT or T-mobile customer, your phone uses a technology called GSM, which is universally accepted everywhere in the world. Every single carrier in the world uses GSM, in fact, except for Verizon, Sprint, MetroPCS, US Cellular and any of the sub-companies below those guys. These companies use a different cell technology called CDMA. You don't need to know the difference. The only thing you do need to know is that if you want to use your existing phone without buying a new one and you have one of those carriers, sadly, it won't work on many of the prepaid carriers out there. That's because a good number of phones are GSM that aren't the crappy prepaid phones that we talked about earlier. You still have options. For example, you could cancel your Sprint plan and use your Sprint phone on Boost Mobile, which is a prepaid company that Sprint owns. This would drop your bill to $50 a month. The only problem with this is that Boost needs to let you do it, which they sometimes won't. and you won't get 4g service and my goal, as I stated earlier, is to get you to cheaper without sacrificing. If you want to go that route just to save money, feel free, but with a little more work, you can keep great features for less.
The second thing you need to think about is what you want for a cell phone. If you have an ATT or T-mobile cell phone, you can spend literally nothing on a new one and keep the one you have with your new prepaid plan. Or, you can sell/give away your old phone and get a new one too. Either way, you'll still end up saving money in the long run, so give some thought on this one. Plus, as I mentioned before, you're free from a contract, so if you decide to upgrade 6 months after thinking you would be fine with your existing phone, don't get too hung up on it. You can easily pop the SIM card into your new phone when you get it without any interruption. This is one of the greatest advantages of a GSM phone in contrast to a CDMA phone like Sprint or Verizon, since CDMA phones don't have the ability to swap out phones without calling your carrier and hassling with them. This is because with a GSM carrier, the SIM card holds your account information, whereas a CDMA plan has its information stored on the physical memory of the phone and it needs to be programmed into whatever phone replaces it.
If you decide to go the upgrade or replacement route, or if you're a Verizon or Sprint current customer and don't really have a choice, don't fret about it. As I said before, cell phones through contracts cost 2-3 times more throughout the contract than if you just bought it outright. So, here's the kicker. Just buy it outright. Now, I know, some people will hear this and cringe. After all, $600 would be a big initial investment. I completely understand. Its a hard thing to swallow. After all, its easier to take smaller hits over that contract. This is why people go for the contract in the first place. However, its the same idea as buying something with a credit card. We're taught not to by our parents unless its an emergency, yet we do and then get ourselves into massive credit card debt. So, just bite the bullet and do it. You'll end up saving literally hundreds of dollars doing it and be happier with your monthly payments. However, if that's still to hard to swallow, there are other options that don't hurt as much. You can keep your existing phone and save up. After all, you put away that money you saved for 4-5 months, you'll be able to buy the phone you want. You can even sell your old phone on eBay or Craigslist to help take a chunk out of your overhead. You can also buy a slightly used phone. There are plenty of people who sell used phones at half off that have nothing wrong with them. And lastly, you can get a Nexus phone, like I did.
Google sells these absolutely amazing phones and tablets that they call their Nexus line of products. They are the latest and greatest in all of Google's services, software, and hardware. They're to Google what the iPhone is to Apple. Both my wife and I have one and they're quite incredible. They always get the latest Android updates first, have rock solid speed and performance, and don't come with those stupid carrier add-on programs, like that trial of Super Monkey Ball that only lasts 10 days and you can't get rid of. And the best part? Their Nexus 4 phone only costs $299. That's only a tad bit more than those top of the line phones from your local carrier. How do they do it? It goes back to the advertising thing, among other costs normally associated with cell phones. Google advertises them on their own site and through their Adsense advertising, which is those ads you see on the internet and Youtube, and it costs them next to nothing. This helps them cut the cost of the phone through they money they save on advertising. It works on either ATT or T-Mobile networks and can be swapped out without any effort at all. To learn more about them, go here: http://www.google.com/nexus
The third part that you need to consider is where you are with your current contract, if you have one. If you don't have a contract or your contract is just coming up for renewal, you can complete disregard this section, since it won't apply to you. However, if you're anywhere from having just renewed to a few months out from being done, you can still get out from under it with a little bit of forward investment. As you know, you can break your contract with your carrier via the means of the Early Termination Fee. You'll need to do some math on it, but about 80% of the time, its worth it for the savings provided by prepaid. Consider this. If you got a $800 phone through a contract with ATT and T-Mobile for $100, you just signed up and have a $300 Early Term Fee, and were to cancel, you get to keep the phone free and clear and it only cost you $400 plus a month of service instead of $800 for that phone. That's probably around $500 for it and you got a month of service out of the deal alongside the phone. Now, you can switch to prepaid and pay $45 a month with that brand spanking new phone you got. Free and clear and without a contract. Does it have an initial investment like the buying of a new phone in the above section? Yes. Will you pay back that investment in a measly 3-6 months and start making it back? Most definitely. Even if you are in a contract with Verizon or Sprint, chances are you have a phone that somebody will want and you can sell after paying your term fee and they can take that same phone and activate it. Then you can use the money to get a new phone that will work with your prepaid of choice.
The final part of this is protection plans for your phone. This is relatively minor, but to some accident prone people or parents, it could be important. As you are all aware, there are plans that carriers offer that let you get a replacement phone no matter what happens to it. You could run it over, throw it in a blender, etc. and they'll give you the exact same phone model for $100 or something similar. You can do the same thing with a prepaid phone a few different ways. Your prepaid carrier might offer protection for your phone similar to the big guys. These are harder to find, but they exist. Or, you can just go the simple route and buy an accidentally warranty through a third party, like SquareTrade. There are plenty of reputable organizations that offer accidental warranties for devices and items beyond what the manufacturer will cover, SquareTrade being one that I've had the most experience with.
The Bottom Line
So, to break down this post in summary, here are the numbers:
Average down payment on new contracted device: $50-100
Assumed cost of average individual plan: ~$100.00
New phone plan: $45 a month
Cost of Nexus Phone: $299
Per month savings: ~$55
Time to repayment in months for new device: About 5
Total Savings compared to a 24 month contract during the same period:
Total Savings compared to a 24 month contract during the same period:
~$780 Savings in 24 months
As you can see, not only do you end up making back with savings in 5 months, compared to 24 months of being stuck in a contract, you also end up with more options and more freedom in your wireless.
I hope this has helped many of you. Next on our list of topics: Cord-cutting - How to cut out your cable television with little to no compromise in available content.
No comments:
Post a Comment