
What you should know
Most people who buy a new phone also sign a contract with a service provider. That way the phone is “free” (or heavily discounted).
In the contract, you agree to make a minimum monthly payment for the term of the contract, typically two years. You get a set amount of minutes, texts, and data. If you go over, you have to pay extra.
Here’s the key difference between a contract and a month-to-month plan: if you end a contract early, you have to pay a penalty.
And that "free" phone is not actually free — the cost is built into the contract payments. You end up paying the full cost of that fancy iPhone over the length of the contract.
With month-to-month plans, you don’t have to commit to a long-term service contract. But you also don’t get a new phone in the deal. Your “old” phone will have to do.
Once your initial cellphone contract runs out, your phone is paid off too. Now you have bargaining power. Ask your current provider: “What’s your best price for a month-to-month service?” And be sure to shop around!
Prepaid services are bought in advance — for example, a prepaid card or pay-as-you-go. Typically, you’ll bring your own phone to this plan.
With prepaid services, you put money into an account. Every time you make a call, send a text or use data, the cost is taken off your balance. When your balance runs out, you buy more credit, “topping up” your account.
Prepaid services are typically less expensive than long-term contracts. You only pay for what you use. There’s no risk of “bill shock” — getting a bill that’s much higher than expected.
But not all pre-paid service is created equal. Some plans allow you to continue using the service even if your account balance is at $0. But you’ll have to pay, and it might be at a different (hint: more expensive) rate than your current plan. There also may be interest charges added if you take too long to pay.
Ask questions when signing up for a prepaid plan. Find out what happens if you go over your balance. You should know how to:
- check your usage balance
- contact the provider’s customer service department
- complain about the service
Protect yourself!
Think you’re ready to sign up for phone service? Check out these key questions you should ask before agreeing to anything.
If a phone handset is provided, what’s the price for the phone alone?
Can I upgrade my phone, and how would that affect my plan?
What’s covered under the extended warranty, and how much does it cost?
And some key questions to ask about the plan.
What’s the minimum actual amount I’ll have to pay each month (including any add-on fees and taxes)?
Do you have coverage where I live, work and travel? (Global coverage maps are available online; check out Opensignal.)
How many texts, local calling minutes, and GBs (gigabytes) of data are included?
If I exceed my limits, particularly for data, what extra charges apply?
A few more:
Are national or international calls included?
How much will I have to pay to make calls or use the internet if I visit another country?
Can I decide to go onto a higher or lower plan if I want to, without penalty?
Exactly how much will I have to pay to cancel the contract or commitment?
Related
On Dial-A-Law
Dial-A-Law has more information on Cellphones in the section on Consumer.