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No one can say for sure if the economy is actually rebounding. Sure, unemployment is down and more spending is happening, but if you watch enough TV news it seems as if the next economic downturn is just around the corner. When times get tough, certain items are the first to get slashed including: vacations, shopping, any type of insurance besides health and auto, and unfortunately "elective" service such as a cellular phone.
Whether or not the economy goes up or down, you can protect yourself and your budget by saving on your monthly bills — especially your cell phone bill. And one of the best ways to save on your cell phone bill is to make sure you have the plan that is right for you.
Contract vs. Prepaid
Do you know what type of cell phone plan you have right now? Most of us are on a contract with one of the major cell phone companies because it's the type of plan that is most promoted through advertising and most versatile for a wide number of people. However, that doesn't mean it's the right choice for you.
The alternative to the contract-style plan is the prepaid plan, which does not require you to commit to a two-year plan but does have other advantages and disadvantages. Whenever you are presented with two legitimate, distinct options there will always be pros and cons. Below are some of the pros and cons of choosing a contract over a prepaid plan.
Contract Pros / Prepaid Cons
1. A subsidy on your new telephone: Are you the type of person who always has to have the latest, newest gadget? Or if you're like me, you always conveniently manage to lose or break your phone right around the time you're due for an upgrade? Most wireless plans are built on the fact that you are going to purchase a new phone. After all, that is where the biggest money markup for wireless providers comes from. However, if you don't need a sleek phone, or happen to be one of those lucky people who never drops their phone, you may not need the subsidy that wireless contracts provide. That would be a point in the favor of switching to a prepaid plan.
2. You'll never "run out": Sure, it's a shame that companies charge you an extra high rate when you go over your contract-allowed minutes by even the tiniest amount. But what if you are on the run or have some pressing need to use the phone? If you are out of minutes on a prepaid phone, you can't use it. You'll have to do without a phone, rely on a stranger to let you borrow their phone, or find somewhere to add more minutes to your prepaid plan. Contract plans will often hit you with a $15 overage or a very high minute-by-minute rate after passing your allotted amount, but if that overage saves you in a pinch, it may be worth it for you.
3. All the bells n' whistles Depending on which provider you choose, if you go with a prepaid plan, you may not be able to get voicemail or text messaging on your phone. The money savings for giving up text messaging are tremendous, but if you like texting or do not have a house phone, you may want to purchase something that has messaging and/or voicemail services. More importantly, many prepaid phones do not come with Internet (see below for ones that do), so if you are like me and primarily use your iPhone as a navigation device… then yeah, you should stick with the contract.
Prepaid Pros / Contract Cons
1. Money, money, money Savings on the prepaid phones are substantial. Let me repeat that: you can save a lot of money with a prepaid plan! In fact, the savings is almost enough to make me forsake the data-riddled goodness of my iPhone. Just to add some concrete numbers to this discussion: I currently pay $85 for unlimited data, unlimited text, and 200 minutes of talk time on my Verizon wireless plan. If I went with a prepaid contract, I could lower that cost to about $35 dollars a month and still have messaging and unlimited texts, but I wouldn't have access to the Internet on my phone. That's a very healthy savings of over $600 dollars a year!
2. You only pay for what you need Especially during tough times, paying for more than you need feels like an outrage, but it is important to be mindful of what you are actually using your cell phone for. If it is merely a way to make phone calls, then you should definitely consider switching to prepaid in order to save money. You won't be charged extra each month because of texts, data, etc.
The Bottom Line
So which one should you choose? Ultimately it is up to you. It depends on how your budget looks right now, whether you have debt, and whether you feel you can give up your contract for a prepaid plan. One final note to keep in mind is that you can usually keep your phone number even if you switch, and many of the major carriers (like Verizon and AT&T) have their own prepaid plans which they don't heavily advertise but which they'll gladly offer to you if you ask a customer service representative. That can make it even easier for those who don't want to switch from their current provider.
Additional Ways to Save
What if you are already in a contract and need a way to cut your phone bill? Take a look at your usage. I did this over a year ago and took myself down from a 450 minute plan to a 200. I saved $20 bucks a month. Sometimes I do go over (turns out, I'm somewhere in the middle; I often need around 300 minutes each month) but it makes me more cognizant of my usage, and nowadays I'm a fiend about trying to take advantage of my free nights and weekends.
My good friend who lives in New York City also recently got a home phone. Between her office line and home phone (which she uses to call her friends and family) she has cut her phone bill in half, and pays a minimal monthly amount for a home phone because it comes with her cable package. For those of you in military families, always ask the provider if they offer any type of military discount or upgrade. A lot of times these discounts aren't advertised, but they usually always do offer some type of incentive to those in the military.
Just like anytime you try to find savings, saving money on your cell phone bill will require you to do your homework in order to find the savings - but whoever said anything came free in this world? The savings in your monthly budget will be well worth the time you put in to research these phone plans.