Choosing a Cell Phone Plan

by Cassandra Heckman

By June 30, 2002, there were 134.5 million cell phone subscribers, up 14% from the previous year. Two of the fastest growing markets for wireless companies are teenagers and young adults. Parents find cell phones are a convenient way to keep track of their kids, and busy kids can use them to stay in touch with friends.

But for many youths, buying a cell phone can be a daunting task with seemingly endless options. And while options and competition help keep prices down, any cell phone owner will tell you it's easy to end up paying more than you should for wireless service simply because you have so many confusing choices to make.

The easiest way to ensure your wireless solution fits your needs and budget is to research before you buy. In many cases, the best resource is the Internet, where you can easily compare plans, features, and prices. Even then, it's sometimes hard to know what to look for. Before you pick a wireless plan, ask yourself these questions:

• Which companies provide service in my area?
• Do I expect to make mostly local, regional, or nationwide calls?
• How often do I plan on using my cell phone?
• At what time of day will I make most of my calls?
• How much am I willing to spend?
• How long am I willing to stay with the service provider?
• Which features like voice mail, caller ID, call waiting, or text messaging are most important?

Which companies provide service in my area?

Who will I call on my cell phone?

Do you expect to make calls mostly from your local area to other people in your local area? Will you be calling mostly to and from only a few surrounding states? Do you plan to travel and call people all over the country?

The three main types of monthly cell phone plans are local, regional, and national. Cell phone carriers define your "home service area" or "local coverage area" as a metropolitan area, a region of states, or the entire nation.

• Local plans usually encompass a metropolitan area and are the cheapest. However, long distance charges may apply when you call people who live outside your area.
• Regional plans encompass about two to five states and are a good choice if you will be mainly making calls to and from one specific region of the country such as the Midwest. They can be a good choice for college students who are going to school in another state that's close to home. Again, long distance may apply if you call outside your region.
• National plans are a little trickier. While they are great for people who travel or have friends all over the country, you have to be careful to read the fine print. I found this out when I did some research before buying my own cell phone. While all major carriers offer nationwide plans, some only offer service on their "nationwide network," while others offer service anywhere in the U.S. While most of the major carriers have huge "nationwide networks," you have to be careful because if you make a call in a rural area that's not on their coverage maps, you can incur heavy roaming and long distance charges which are sometimes upwards of 50 cents a minute!

How often and when will I use my cell phone?

These questions may be the most important to answer so that you find a plan that fits your budget and doesn't overcharge. Many people don't know their calling habits and end up paying for minutes that they don't even use.

First, you can keep track of your "land line" home phone use. This can give you a good general idea of who and when you call. However, since people's calling habits often change when they get a cell phone, another solution that I recommend is instead of signing up for monthly service right away, start with a prepaid cell phone for a month or two so you can see how much time you're on the phone and when.

Most monthly plans offer combinations of "peak" and "off-peak" minutes and each minute you are on the phone is deducted from your allotted monthly amount. Peak minutes are commonly referred to as "daytime" or "anytime" minutes and generally count as any calls initiated between 9 a.m. and 9 p.m. However, these times differ for some carriers, so be sure to check. In any case, be careful because if you start your call at 8:59 p.m. you will be using your "daytime" minutes since providers usually define the call by when it started.

While the amount of peak or anytime minutes allotted in most plans is limited, it is becoming increasingly common to find plans with unlimited "off-peak" minutes. Off-peak minutes or "nights and weekends" generally include weekdays after 9 p.m. and all day Saturday and Sunday.

The distinction between peak and off-peak is why it is so important to know your calling habits before you buy. If you go over your allotted monthly minutes, you'll get charged extra per minute, which adds up quickly. Since the cost of a monthly plan mainly depends on the number of peak minutes you get each month, you don't want to pay for more than you will use. Plans with fewer peak minutes are cheaper than those that have more.

How much can I spend?

Once you've determined your needs, it's time to figure out how much you are willing to spend. It can be helpful to figure out a budget and add up how much money you make from jobs or allowances and compare that with how much you already spend each month. How does a cell phone fit in?

You may want to consider a family plan if your parents will be paying your phone bill. Most major carriers have plans in which family members each have their own phones but share minutes each month. In some cases, calls among family members are free.

If you decide to sign up for monthly service, it's important to look around for the best deal for you. This is where the real research comes in. Weigh the cost of the plan against the coverage area, features, monthly allotment of minutes, and your budget. You can find monthly plan information on wireless providers' Web sites or go to sites like About.com to compare plans from the major providers. Call the company directly if you have specific questions.

How long can I commit?

You'll also want to know how long you are willing to commit yourself to one service provider. Some companies offer month-to-month service that doesn't require a contract, but it's usually more expensive.

The alternative is a one- or two-year contract. If you sign a contract, you enter into an agreement to stay with that provider for one or two years. And while most providers will let you switch from one of their plans to another for free, if you want to switch providers you can face contract termination fees of up to $200.

The advantage is that in order to entice you to sign up with them, most providers will provide great discounts on the cellular phone itself.

What extra features are most important to me?

Today most companies include standard features like voice mail and caller ID free with monthly plans. However, there is a dizzying array of other features to choose from. Many, like text messaging or wireless Internet access, will have a monthly or per use charge. So once you've figured out how much you can afford to spend, see if these extras fit your budget. If you don't really need wireless Internet or text messaging, eliminating them from your plan can be a good way to save money.

You also have to make sure that the phone you choose is compatible with the features that you want. For example, older phones may not even have the ability to transfer data on the wireless Internet, so be sure to check with your provider.

What else do I need to know?

• Your first bill will be more than you expect. Don't be upset if you receive your first bill and it's higher than the cost of the plan you chose. There will be one-time charges for activation and/or security deposits, accessories, and taxes.
• You will be charged for both outgoing and incoming calls. Your provider will deduct the minutes of both the calls you make and the calls you receive from your monthly allotment.
• Use your caller ID. Avoid wasting minutes on incoming calls by using caller ID to skip calls from blocked or unfamiliar numbers.
• Don't count on your phone's call timer. Newer phones often include a call timer that keeps track of how many minutes you have talked on the phone per month. However, these timers will not differentiate between calls made during peak and off-peak times. In addition, almost all providers will count a fraction of a minute that you're on the phone as a full minute. For example, if you make a call that's three minutes and 30 seconds long, your call timer probably will record it as such, but your provider will round it up to four minutes. Over the month, these fractions of minutes will add up to be a big difference between what your call timer and your provider says you've used. Luckily, most providers allow you to check your minutes used online or over the phone.
• Know your coverage area. One of the easiest ways to save is to be familiar with your plan and coverage area. That way you can avoid costly roaming and long distance charges.
• Read the fine print. Be familiar with the terms of your contract. It is essential to know what is included and for what you'll have to pay extra. It's also helpful to know exactly when you have to pay extra for long distance. Knowing what you're agreeing to is the best way to save money and know if there is a problem with your bill.
• Re-evaluate. It's a good idea to re-evaluate your plan periodically. That way if your use, needs, or budget changes you won't be spending more than you need to. While it can be expensive to switch providers because of termination fees and new equipment, most providers will let you switch from one of their plans to another for free.

Published February 10, 2003

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