If you think that you’re paying too much for your wireless service, you’re probably right. It’s always a good idea to evaluate what you need from your wireless carrier, and to take a careful look at how much you’re paying each month and what you’re really getting, especially if you’re going through the process of finding a better plan or smartphone.
There isn’t a single plan that’s perfect for everyone, nor one that’s universally “the best deal.” Each of the major carriers offers a dizzying array of plans and numerous ways to buy a new smartphone, and choosing the right plan requires some careful thinking about what you need (and, at the very least, a basic understanding of how much data you use in a month). The plan that’s best for you will depend on how much data you need, how often you want to upgrade your smartphone, whether you need to use your phone abroad, and how many people need to be on the plan.
Further complicating the search is the fact that while there only a few major carriers, there are dozens of smaller players that want you to ditch your plan with Verizon or AT&T and sign up with them, instead. Doing the research that’s necessary to do so may sound like too much work — until you realize that all four major carriers in the United States routinely charge people too much for the service they’re actually getting or using.
The price that you pay for your service is highly dependent on what kind of service and features you want. ABC reported last year that the average American spends about $1,000 a year on his or her cell phone bill, but some analysts estimate that about $50 billion is wasted annually on parts of the plan that aren’t used. And that’s not the only way that you could be paying way too much for your mobile plan. There are good and bad deals with practically every carrier, but all four major carriers in the United States overcharge for their services. Here are some of the ways that carriers charge way too much for what you’re getting.
1. Verizon’s bills are higher than those of any other carrier
As Ars Technica reported in 2014, a survey by Cowen and Company found that Verizon has the most expensive average bill of the four major carriers in the United States. The average monthly Verizon bill was $148, higher than Sprint’s $144, AT&T’s $141, and T-Mobile’s $120. The numbers reflected postpaid subscribers, included all taxes and fees, and included both individual users and customers with family plans. Across the industry at the time, 68.5% of postpaid respondents were paying for family plans, while 26.1% had individual plans, and 5.4% were on corporate plans. Verizon had the most family and corporate plans, with 72.3% of respondents paying for family plans and 7.0% on corporate plans.
LTE and the iPhone both drive revenue for carriers and contribute to Verizon’s sizable bills. Both LTE users and iPhone owners generally use more data than 3G users and Android phone owners, which necessitates a more expensive plan. “LTE individual-plan postpaid subscribers generate $103 (including taxes) whereas non LTE individual-plan postpaid subscribers generate $76 (including taxes),” the report said. “Individual-plan postpaid iPhones generate $104 (including taxes) whereas Smartphones non-iPhones generate $94 (including taxes) and non- Smartphones just $63 (including taxes).”
2. AT&T and Verizon charge hefty overage fees
Damon Beres reported for The Huffington Post earlier last year on a study published in the American Economic Review, which suggests that you might be overpaying on your monthly bill because of a policy that’s actually supposed to help you save money. Under that policy, which went into effect in 2013, carriers like Verizon and AT&T will send you a text message to let you know when you’re approaching the monthly limit on your data. The idea is to prevent the “bill shock” you experience when you look at your bill and see a much higher charge than expected because you unknowingly went over the data limit allowed by your plan.
The text message helps you to curb your data usage before it’s too late — as long as you can calculate how much data you have left and successfully adjust your usage for the rest of the month. But because carriers now need to warn customers, they’re earning fewer of those lucrative overage charges. So they’re making up that lost revenue by adding on or increasing other fixed fees. The upshot is that even if you don’t ever go over your data allowance, you’re paying a little extra to compensate. And if you do go over your data cap, you pay an overage fee plus the extra charges that carriers use to pad their bottom lines.
When signing up for a new phone plan, the average consumer often isn’t sure how much data he or she will need each month, and carriers generally don’t help shoppers figure that out. And if you don’t accurately gauge how much data you need, you’ll get caught between two equally unsavory options: paying for a lot of data that you don’t need in order to avoid paying overage fees, or getting a plan with an insufficient amount of data and occasionally getting hit with hefty overage charges. If you’re on Verizon or AT&T, you’ll end up paying $15 per every GB over your plan’s limit, and just an hour of Netflix can eat up 3GB of data. As much as you can, stay aware of how much data you’re using, so that when it comes time to shop for a new plan, you’ll be able to determine how much data you really need.
3. All four major carriers — AT&T, Sprint, T-Mobile, and Verizon — demand high cancellation fees
Christina Bonnington reported last year for Wired in 2014 that while the two-year mobile contract and the carrier-subsidized smartphone can be great, they’ve given rise to a much less favorable development: you’ll get hit by sky-high cancellation fees if you want to end your relationship with a carrier before your contract expires. If you want to end your contract with AT&T, you’ll pay $325 minus $10 for each month that you’ve completed. Sprint and Verizon charge up to $350 unless you cancel within the first two weeks of your contract, and T-Mobile will ask up to $200 depending on how many days are left on the contract.
However, unlike many of the other fees that you pretty much have to pay if you want a carrier’s service, there are some ways around those cancellation fees — ones that don’t involve just waiting the contract out. Bonnington reports that you can sell your plan through a site like Cellswapper or TradeMyCellular, or track changes to your terms of service and take advantage of “material changes” to find a way out. Alternately, you can find a carrier that will pay your cancellation fee for you, like T-Mobile.
If you’ve ever had to pay a steep cancellation fee, you’ll probably be happy to realize that two-year contracts are on their way out. While plenty of people are still using phones and cell service that they got with a two-year contract, and a few carriers have kept or reinstated the option, contracts are much less prevalent than they used to be. Many carriers have replaced them with leasing or installation plans, options that are more transparent for consumers but also more lucrative for carriers.
4. Many carriers, like AT&T or Sprint, won’t reduce your bill when your phone is paid off
Despite the move toward leasing options, many consumers love their contracts and subsidized phones because they make it easier to afford a brand-new phone. But it’s often because of those subsidized phones that you end up paying a lot more for your monthly mobile service than you really should have to. Mashable’s Jason Abbruzzese wrote in 2014 that there was a time when a contract made sense — a time when you used your phone only for voice and text, and your level of usage stayed about constant.
But the model of committing to a carrier for two years in exchange for a subsidized phone is illogical for many users as their data use continues to rise. And as users move away from subsidized phones, carriers are encouraging them to buy financed phones — just another way for carriers to perpetuate your reliance on them and prevent you from easily switching between carriers. Additionally, many carriers, like AT&T, don’t adjust the price of your monthly service once you’ve finished paying off a subsidized phone.
If you have the cash, you’re a lot better off buying a phone outright to use with a service that won’t require you to commit to two years with the same carrier, whether that two-year commitment comes in the form of the contract or an installment plan. If that’s not possible, make sure that your carrier will reduce your bill once you’ve finished paying off your phone. That way, you won’t continue paying the fees that were originally intended to add up to the retail price of the phone long after you’ve paid the full price.