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Summary:

Mobile consumers are increasingly looking to cut costs by moving to bargain-basement unlimited prepaid plans. One consumer advocacy group says that getting out of your postpaid plan and moving to prepaid may be cheaper than you think.

The ultra-competitive prepaid market is producing some astoundingly inexpensive all-you-can eat rate plans. And breaking your cell phone contract to take advantage of them may be cheaper than you think.

That was the message during today’s press call by Consumer Action, a nonprofit consumer-advocacy group that opposes what it calls “excessive” early termination fees (ETFs). The group — which is funded in part by TracFone, the prepaid service provider — offered the following suggestions for users (like Stacey) who are considering ditching their carrier in favor of cheaper offerings:

  • Determine whether you are in the ETF “penalty box.” Users who’ve had the same phone and price plan for more than two years are probably unaffected by ETFs. Those who are subject to the penalties may have to pay only a prorated amount.
  • Do the math. A $150 penalty may seem steep, but it’s quickly offset if you can cut your $90 monthly phone bill in half.
  • Avoid re-upping with your carrier. Operators typically offer new phones or more attractive price plans to users nearing the end of their contracts in an effort to lock customers in for another two years.
  • Watch for carriers looking to change the terms of the contract. Major changes in terms can allow consumers to kill service without paying an ETF — which is an option Kevin over at jkOnTheRun began considering with his Palm Pre last week.

ETFs have become a hot-button issue in Washington, too, as evidenced by the FCC’s current probe into Verizon Wireless’ policies. Verizon recently doubled its ETF for some high-end devices from $175 to $350, claiming the move was necessary to stop users from taking advantage of its buy-one, get-one-free promotion for BlackBerry handsets only to kill service and sell the phones on eBay. The FCC today granted Verizon’s request for additional time to respond to the inquiry, pushing back the deadline to Monday. But with the FCC stepping up its role as a consumer-friendly regulatory agency, ETFs are likely to continue to be a point of contention between network operators and the Beltway in the months ahead.

Image courtesy Flickr user seretuaccidente.

  1. Not mentioned in post, AT&T GO Phone pre-pay data plan rolls over each month.

    I am currently running an AT&T Go Phone pre paid SMS in my Android developer phone, making maximum use of the data roll over feature and saving a ton of money.

    Blocks of 100 megs of data are $19 ( nineteen dollars ) each.

    Un-used data rolls over to the next month and accumulates quickly. My personal data use equates to around 90 or so megs a month, so I’m in the sweet spot, and have accrued just under 300 megs of rolled over data, available to me when a big spike occurs ( like South by Southwest in Austin )

    Note – If you barely use the web on your phone -OR- you use gigs and gigs, pre pay data plan is probably not for you. But if your usage is similar to mine, then yeah, ETF out of thing!

    Epic savings over post pay data plans.

  2. I hate ETFs as much as the next guy but please don’t blame the wireless carriers. Pay full price for a phone and you have no ETF. You want a free phone and no ETF? Why don’t you just ask the companies to pay you to use their service.

  3. People thinking of going pre-paid may get a better deal but also need to read the fine print. Many of the prepaid minutes that you buy will expire in 30, 60, 90 days or more, unless you refill before the expiration, in which case they might roll over but then still have to be used to before they expire. This might keep you in a constant state of trying to get the most out of your minutes.

    Then there is the lack of roaming with some of the providers or plans. For some, this is a deal breaker.

    People with smart phones (i.e. more expensive data plans) will save co. But if you’re at the lower end of the regular phone plans, it may or may not be worth it.

    Also, if you are at the end of a contract with one of the major providers, give them a call, tell them you’re thinking of moving on and see what they offer you. We just resigned with Sprint for a 2-line family plan after they cut $20 a month off our bill for the entire contract, gave us a $50 credit for resigning, and gave us new phones.

    Weighing all that against saving a few bucks a month with the added hassle of managing minutes, refills and having to buy a new phone (which you have to do with almost all prepaid services) and it wasn’t worth it.

  4. It really paid me to cancel my contract and get a prepaid Straight Talk phone. And the phone I bought wasn’t just any phone it’s a smartphone – Samsung R810C “Finesse,” a touchscreen phone that can run apps, includes a 2 megapixel camera and offers a full QWERTY keyboard, as well as Blutooth and high-speed data access. Then I got the unlimited minutes, texts/mms and data package for $45 per month; and it’s all running on Verizon’s network nationwide which according to consumer reports is the best network in America.

    Now let’s do the math – My friend has an iPhone which he pays $150 per month for and they limit his data and moan if he spends to many minutes on calls. After two years he will have paid $3600-00.

    I have a Straight Talk Finesse which cost me $329 on the Straight Talk web site for the phone and then $45 per month for unlimited everything, after two years I will have paid $1409-00.

    That is a third of the iPhone and it’s better because I have better network coverage. Even if you added in a ETF of $170 it would still be cheaper and save you money.

    Now that’s just my plan and I like to have the best phone and package but there are cheaper phones and packages that you could get and they would save you even more.

  5. People can also consider buying a used smartphone from friends, Craigslist, or eBay. You take that phone, unlock it if it is not already, and get a cut rate plan from a carrier (easier if it’s GSM, with just a SIM chip to slip in.)

    There are better options than the cheap pre-paid, too. If you can put it on a family plan (assuming the family already has two full-rate phones), the next phone usually costs just over $10/month.

    Figure that the iPhone launched in June 2007. Scads of those were bought for that first Xmas. Lots of those first gen iPhones are now coming off their 2 year contracts, and are available second hand. Scoop one up, jailbreak it (easy for moderate geeks), and sign it up on a T-Mo or AT&T family plan for $12. Get fast data over Wi-Fi at home, the great UI, and a trivial TCO. No need to hide from AT&T, as this is totally legit (although not their preferred offering). They’ll even happily sell you the unlimited data (EDGE) for $20/mo.

  6. I had Verizon then switched to AT&T but the bills were CRAZY!.

    I hadn’t considered prepaid but when I heard about Straight Talk I couldn’t believe it but got it from Walmart and have had it now for 2 months and it is just sick! I’d heard that it was on Verizon and the coverage is rock steady, so yeah!

  7. When you have the potential to save nearly $1,200 over two years getting away from a carrier, you have to make the switch. Straight Talk has made these savings real for me as I just finally cancelled my outdated AT&T contract and went the pre-piad route. I will never go back – Straight Talk’s unlimited $45 a month plan is great and I truly have unlimited texting, calls, and surfing. Being on their shared Verizon network allows me coverage and calls everyhwere. Best of all, I have no contract to worry about and a selection of well-priced phones that do not make me upgrade to get them.

    I never thought Walmart would have the answer to my cell phone problems, but they do. Straight Talk makes having a phone and actually using it a breeze.

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