How Much Does A Contract Cost You?

With the ever increasing prices and the capping of data, cellphone contracts are starting to look like a great deal, or are they? Prepaid services are the only choice for those with poor credit, no credit or those that just want to make sure that what they sign up for is what they get. Nothing can drive a person insane more than a big ad in the window that says “Unlimited Everything – $99.99” and then seeing the first bill come in at $250. Sure you say? But look at the bill closes, the activation fee: $36, the first (prorated of course!) and last month: $170, the taxes: $30, the surcharges: $12. Grand total: $248… So why is a prepaid service ‘sometimes’ a better deal?

Prepaid companies live off the big networks, and sell services at cut rate prices just to make a few bucks on a line. For example, Virgin Mobile runs off the Sprint network and has a 1200 minute plan for $45 a month. This includes unlimited text and data – which smartphone users are more likely to run up anyways. This is the same as the Sprint $79.99 plan, but with more anytime minutes, but no the mobile to mobile minutes. If you aren’t a big talker, it’s not going to matter to you anyways. SIMPLEMobile goes a step further, allowing a user to bring any unlocked GSM phone to their party for $40 a month for unlimited everything on the T-Mobile network. If you have decent coverage in your area of either of these networks, these plans can save you up to $1000 on your primary lines and $2500 on a family plan over the life of a 2 year contract.

Sure, there are a few drawbacks to prepaid services. First, they don’t subsidize your handset cost, and frankly, the selection is less than great – usually. Virgin Mobile offers a few decent smartphones in the form of the Motorola Triumph, LG Optimus V, Samsung Intercept and the newly acquired HTC Wildfire S. Most of these devices will set you back between $200 and $300 and aren’t featuring the latest and greatest technology, but are more than enough power for the average user to scrape by on. SIMPLEMobile certainly changes this up by allowing you to purchase any unlocked GSM phone and activating it. The cost on a new generation unlocked phone will be $500-600 and may take a while to pay off in savings. Of course, the advantage to this is that that $500 phone you buy now will still sell for $250-300 in 6 months when you want a new one.

Looking strictly at the numbers, the average single user will spend quite a bit with a ‘major carrier’ over the life of their contract. You need to factor in the device cost, the monthly service cost and taxes to get a real feel for the numbers involved. Leading the way in value is none other than T-Mobile at just under $1900 for a 2 year price. The same service will set you back $2300 on Sprint or Verizon. Looking over to the prepaid services, SIMPLEMobile will run you $1460 with a generous $500 allowed for a handset. Boost Mobile slips in with a total of $1390 with their “Shrinkage” option and a $250 handset. Virgin Mobile hangs on to the top spot in deal central with a total of $1140 with a $300 handset and 1200 minutes per month.

Sure, comparing apples to apples , Boost and SIMPLEMobile offer the biggest bang for the buck, but that “$1200” number is a tough cookie to crack and Virgin Mobile does it with ease. Imagine cutting $50 a month off your cellular bill and what you could do with all that extra cash!



2 Comments Add yours

  1. Thrift Daddy says:

    I personally believe prepaid is the only way to go anymore. It doesn’t matter if you have the credit for a plan or not. There are many carriers offering unlimited talk, text, and web and usually for no more than $60 per month. You can’t beat it. When you look at a cell phone bill, there are so many additional fees and taxes that it’s ridiculous. You can, and I have, easily paid out $20 or more each month. With prepaid, however, the only thing extra you will usually pay is sales tax. As far as your phone goes, free isn’t always better (I can’t believe I said that). Sure, you have to cough up the cash upfront with prepaid, but over the life of the phone it’s usually worth it. If you bought a $200 phone and divided it by 24 (typical contract term), it only works out to $8 and some change each month, which still puts you way below what you are likely to pay on a plan each month. The only thing to really watch out for when shopping prepaid plans most providers charge a few more dollars each month if you are using a smartphone. But, in my opinion, still worth it!
    -Thrift Daddy

  2. We couldn’t agree more! The $200 up front cost for a device + the first month of service will run $235 – $260 depending on the carrier and plan. That’s about the same as buying a “FREE” device from your carrier and getting that pro-rated bill for the first 2 months, activation fees and taxes.

    While the ‘bill’ for the phone and service are about the same, when you hit month #2, your savings starts adding up immediately. Plus without the added taxes (usually 15-20% more than your plan cost) your savings adds up even faster!

    Just make sure you have good coverage before you sink too much into that $200-300 handset. Otherwise, you just purchased a pretty expensive paperweight.

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