Cell phones

23 Feb

Cell phones, those amazing little gadgets we’ve all become so dependent on, to the point that many of us no longer have a traditional land-line based telephone in our homes.

They are also something we’ve begun to get increasingly aggravated with, as carriers lock us into long term contracts with high financial penalties if we attempt to cancel the contracts for any reason.  Those contracts can look very attractive initially, but as time moves forward, and our lives change, they often become increasingly unwieldy monkeys riding on our backs.

Especially in the economy that has plagued us the last five years.

Faced with shifting fortunes, rising costs, and shrinking incomes, many people are desperate to reduce their monthly expenses, to get them to the point that their outgoing bills are less than their income.  That’s something our government isn’t very good at, not only for themselves, but for their constituents.  Corporations, however, seemed to have perfected the art of extracting blood from turnips.

With your cell phone carrier, they often have you over a barrel.  You can’t afford the monthly expense, but you certainly can’t afford the cancellation fee, or the negative notation on your credit history.  There aren’t a lot of options available, especially when you desperately need that cell phone, whether because it’s your sole connection with the outside world, or because you are searching for a job.

There are a few things, especially when faced with a temporary financial crunch, as well as some other things you can do to prevent being caught in the contract bind, while not causing undue financial hardship.

First, resist the urge to “upgrade” your phone at a reduced initial cost and renewing your contract.  This is where the cell phone companies are dangling a carrot out there, intending to keep you on THEIR treadmill.  Resist the temptation, and either continue using your old cell phone or buy another outright.  To keep costs down, you can often buy a used phone via Ebay or other outlets.  Do your research, make sure that the make and model is compatible with your carrier, as well as has some kind of guarantee from the seller that it will arrive in good condition.  You’ll still have to pay an activation fee.

If you don’t actually need a smart phone, skip the trend, stick with a basic function phone, which often can be used on a smaller data package.  These smaller plans without large data packages can save $10 or more per month, which can quickly add up.

Don’t add lines.  Each line comes with an additional contract, usually 24 months long.  If you have a need for additional phones, consider a prepaid option instead.  Then, if it turns out that it’s not needed anymore, you aren’t faced with an unnecessary bill.

If you are locked into a contract situation, and desperately need to cut your bills, there are a few options available.  Check to see if you can change the plan itself without altering your contract.  This option exists with many cell phone companies, and by switching to a basic phone with fewer bells and whistles, you can often cut your plan as much as a hundred dollars a  month.  Don’t cut it so short that you end up going over your limits however, overages are very expensive with many companies.

There is also the option of “suspending” your contract temporarily, usually up to 3 months.  This may have a monthly service charge, but it will allow you time to get your finances under control.

If you are not locked into a contract, you may want to explore other options, even if your finances and job situation looks bright and cheery.  By avoiding the contracts, you are free to explore other options as they become available, without having to wait.  That means everything from the latest iPhone to the different packages available.  It also means that if you are suddenly offered the perfect job in some exotic location, you won’t be biting off a chunk of that “early termination fee.”  Numerous companies offer prepaid plans, some even have iPhones and other smart phones available, complete with unlimited data and minute plans.  Straight Talk, available through Walmart, is one of them.  It is also serviced by the Big Three in cell phone providers: AT&T, Sprint, and Verizon, depending on your location.  If you move and your old phone isn’t served in the new area, the problem is solved by simply purchasing another phone, and you are never stuck with a two year contract that leaves all of the cards in the cell phone company’s hands.

Contracts, ranging from one to three years, have become the bane of the consumer’s life.  They are everywhere, increasingly restrictive, designed to reduce competition for our dollars for years at a time, and ultimately reducing the level of service we manage to choke out of the various corporations.  Once you are locked into their services, its virtually impossible to change suppliers, no matter how terrible their service becomes.  It’s not a good trend, especially in a world that has increasing numbers of monopolies to which the consumers are becoming enslaved.

We don’t really have a choice about our electric, natural gas, water, cable, or land based telephone service, yet these companies want to often lock us into contracts to continue receiving their services, and leave the consumer with early termination fees if they decide to move out of their service area.  Cell phone companies do the same thing, using the carrot of reduced cost cell phones to entice customers to their two year enslavement.

To make it even worse, a cell phone is locked to a specific carrier, preventing the consumer from going to another carrier and acquiring service for that phone.  That means even if you aren’t locked into a contract and have a $500 cell phone, you have to buy their service, or buy another cell phone.  Is this really fair?  After all, you bought the cell phone, not leased it.  The cost was not subsidized by the cell phone company.

Something has to be done about all of these corporate monopolies with their abilities to turn us into their indentured serfs for years at a time.  In the meantime, the only way we can avoid that trap ourselves is to carefully read the fine print, avoid contracts with penalties for early termination, and learn to pay as we go.  Prepaid cell phones are one option, and unlike the early days when their fees were outrageously high, they have become increasingly competitive.  Today, Straight Talk, one of the larger prepaid companies, is part of TracFone, and it is marketed through Walmart.  Their unlimited voice and data plans are $45 per month, with no contract and no penalties if you don’t like it, but you do have to purchase the phone, which range in cost from about $19 to nearly $500, depending on features, models, and brands.  Their customers seem to be about equally as satisfied as those who are paying $110 or more for the same service with a contract.

So what does a person really get with the additional $65?

You get a two  year contract, and a reduced price on your phone, plus a $35 activation fee.  That means that at $110 per month, you will pay an extra $1595 for that cell phone in lieu of just purchasing it and going with a cheaper prepaid plan.  Outside of that, there is little difference between companies.  Sure, there is “tech support” with your contract phone, but have you ever used it?  Did it offer you any help?

There’s another reason to consider the no-contract phone.  In the case of a Straight Talk phone, Walmart offers a protection plan that includes water & humidity damage, and costs from $6 on up, depending on the initial cost of your phone.  With most companies, the “insurance” on your phone is about $7 per month, and in the event of water or humidity damage, the replacement can cost you $100 or more, as well as has to be mailed to you anyhow.  With Walmart’s protection plan, there is apparently no deductible on the phone, which means that the difference (in 2 years) can be over $160 per month for better coverage.

Then there are the hidden charges on contract cell phone service, all of those mysterious taxes and service fees that really will surprise you, as they approach increasing the price 20-25% per month.  Without the contract, the fees are included, providing you with a manageable price per month that can be adapted to  your budget.

Sure, there are no “discounts” on the phones initially.  They have to be paid for, along with shipping (if you don’t pick it up in the store) and taxes.  But…in the first two years alone, assuming you don’t damage the phone or get a huge desire to have the latest iPhone or smart phone, you will save $1757, minus the cost of your phone.  Even the phone’s cost may not be as high as you think–it isn’t uncommon for the phone from the carrier to cost $100-300 more than your “discount”, leaving you with a big bill.  The same phone or a similar phone with similar features, may be available from a no-contract program at roughly the same price.

The no contract phones are also an excellent idea for parents with a child acquiring their first cell phone, a teen with a new cell phone, or even a college student’s cell phone needs.  It means no surprise overages resulting in bill shock.  An inexpensive phone for calls and simple texting can be a solution for a child, who is more likely to lose or damage a phone.  (Loss is not part of the coverage from Walmart’s protection plan.)  If a cell phone is lost, there are also no worries that there will be calls to Dubai and Hong Kong suddenly appearing on your bill either.  These cheap cell phones can also be considered a temporary or “throw away” solution to a short term cell phone need–if an additional phone is needed during an emergency or travel.  They also offer international plans, handy if calling out of the country, as well as plans for 3 months, 6 months, or a full  year.  Imagine trying to pay a year in advance on your contract phone!

I’ve talked to customers that have used Straight Talk, and they are generally happy with the service they have received, whether it was their first cell phone or a replacement for the contract cell phone.  I also know people with a number of other carriers, including Sprint, AT&T, Verizon, and C-Spire.  The ones with other carriers are usually not as happy, and often are chafing at the bit for their contract to end, whether for financial reasons or because another company offers a desirable service or phone that is not available with their current carrier.  Sometimes it is due to relocation, and the service available in their new area is not as good as it was in the old area, leaving them paying for substandard reception or perks such as a local store that repairs their phone.

With a no-contract service, you are still free to choose to use a traditional contracted service at any time, if it turns out that you aren’t happy with it.  The sole complaint that I have noticed with no-contract services is number portability–it can be expensive, not available, or a pain.  If this is not an issue, one way to test the waters is to buy an inexpensive phone from one of the companies and try it before terminating your contract.

The phones can be served by one of three carriers, and not all carriers are available in all areas, and even in the areas that they are available, they may not offer the same type of reception.  There are also many issues with both 3G and 4G service, especially in small towns and rural areas.  Read reviews, find out which phones are served by the company that offers the best service for your area, as well as the areas in which you frequently travel.  In my case, I know that Verizon does not service the area in which my daughter lives, and therefore, I would not consider using Verizon as a contract carrier OR via a prepaid program.  Unfortunately, both AT&T and Sprint have spotty coverage throughout the rural areas of my home state, so either one could also leave me without a signal while traveling elsewhere.  That problem is true for most of us in the United States–no carrier provides complete coverage anywhere.

In addition to prepaid plans from companies like TracFone, the cell phone companies often offer a prepaid plan.  Unfortunately, they often don’t let you use the same phone that you may have used with their contract service, requiring you to purchase a different phone (at full price, with limited choices.)  Even with that, for many people, their services may be a better option.

Avoid the contracts when possible, and keep your independence and freedom of choice–it’s the best choice for your financial future as well.  Never set yourself up to end up with a big bill by adding friends or relatives to  your contract service unless you truly are independently wealthy.  Instead, opt for the no-contract version, even if you purchase the phone and plan, you will protect yourself from unexpectedly large bills in the future.

Write your representatives and senators, asking them to offer the consumer relief from these unwieldy contracts that favor the corporations, as well as to legally unlock cell phones and make them able to work with any carrier, and removing the monopolies that plague us all.  It’s high time that corporations began being accountable for their services, rather than able to rape the consumer with high rates, poor service, and long contracts with large penalties.

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