“We don’t carry cases for those throw-away prepaid phones.” — An associate at a big box electronics store to my mother.
Long before I called myself the “Frugal Geek,” I learned a series of valuable lessons from my parents about saving money on things for which most people overspend. Even after over a decade of living in another city, I’m still learning new lessons from them regularly.
One such lesson came from their decision to give up standard mobile rate plans in favor of prepaid plans. I’ve been preaching the financial advantages of prepaid plans throughout 2012, but when my mother opted to go with an inexpensive phone with an integrated qwerty keyboard and an OS that looks like it hopped out of 2006, I was intrigued.
I’ve spent the past three years telling people whether they should buy an iPhone, Windows Phone, or Android device. It didn’t occur to me just how many people are just like my mother. They use their phones as actual phones and beyond text messaging here and there, the device really doesn’t play a large role in their lives.
Perhaps we’re pushing these expensive computers on people that don’t want or need them. They just want a phone they can use to make a phone call and/or send a text message now and then. Why spend $60+ on a plan that includes unlimited data if you really don’t need to? That’s what phone carriers are hoping for, and this is a misconception we could all benefit from getting past.
Prepaid plans and inexpensive phones can save you hundreds — if not thousands — of dollars per year.
Here’s the deal. By getting off contract and going with a prepaid plan that only charges her when she actually uses the phone, my mother is able to enjoy unlimited minutes and text messages for $2.00 per day being charged only on days she actually uses the phone. She does have to meet a minimum of $25 every three months in order to keep the phone in service, but that’s not exactly going to break the bank for her.
This works because she’s a light user who doesn’t have her phone on most of the time. She doesn’t text or make calls every day.
For someone who is a bit more of a heavy user, prepaid plans are available for as low as $40/month that offer a substantial amount of minutes, unlimited text, and plenty of data. If you can live without a data plan, your rate can drop down into the $20s or lower with unlimited text messages and plenty of minutes for daily use.
Contracts work for phone companies because they exchange a small discount on a device for a premium on your monthly plan. If you continue your service after the contract is over, you’re still paying a premium for a phone you’ve already bought free and clear.
In many cases, you can buy a high-end smartphone outright at the full retail price and still end up with more money in your pocket after a year of prepaid service without sacrificing minutes or data coverage.
T-Mobile offers some of the best prepaid plans out there, but you could easily compare prices and rates for your current provider to see which one has the best deal for you.
With this in mind, perhaps we’re all spending a little bit too much on phone service.