While T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) have been steadily lowering the cost of their wireless plans, most Americans still pay a pretty hefty amount for wireless service. As of January, 2014, a study from Cowen showed that Verizon (NYSE:VZ) customers paid the most, with bills averaging $148 per month including taxes and fees.
Sprint has the second most-expensive service, at $144 on average, followed by AT&T (NYSE:T), at $141. T-Mobile has the cheapest service, on average, at $120 per month. Those numbers were very similar to Cowen's 2013 survey, where Verizon was the most expensive, at $153 per month. T-Mobile was the cheapest, at $133, and AT&T and Sprint were in the middle, at $147 and $143, respectively.
It's almost certain those number will drop for Sprint and T-Mobile customers when the research firm releases its 2015 survey, as both of those companies introduced aggressive new pricing during 2014. Still, no matter how much or how little you are paying, chances are you could pay less.
Here's a look at some ways you can cut your bill without scrapping your wireless phone altogether.
Buy a cheaper phone
It's tempting to have the latest Apple iPhone or the hottest Samsung Galaxy device, but it will cost you throughout the life of the phone. If you choose to buy the hottest phone using a subsidy, you will have to sign a two-year contract and pay a higher monthly rate per service.
If, however, you choose to finance or buy your device outright, you'll not only pay less for service, you'll pay less overall. In the past, that might have been a major trade-off in features, but there are now cheaper Android and Microsoft Windows Phones which are very well regarded. They may not be as sexy as having an iPhone, but they perform all the necessary functions well. Here's a look at the monthly cost of a number of leading phones from T-Mobile -- which does not offer subsidies.
|Phones||Monthly Payment||Total Paid|
|Apple iPhone 6||$27.08||$649.92|
Galaxy Note 5
|Microsoft Lumia 635||$4.16||$99.84|
Every phone listed here has at least four out of five stars, with more than 150 reviews, and none -- including the iPhone and Galaxy Note 5 -- has the full five.
That's a savings of more than $425 in the case of the Note 5, and nearly $550 for the iPhone. You're giving up something in terms of function, but the savings may make it well worth it. And it should be noted that the gap between the top of the line and the bottom seems to shrink with each cycle. Microsoft especially is delivering some budget phones that perform close to models at top prices.
Leave the big four carriers
Though Sprint and T-Mobile have lowered their prices, they cannot begin to approach the prices by companies that offer phone service primarily over Wi-Fi. One such service, Freedompop, has prices that start at free after you buy a phone. (The company sells a number of older refurbished models for reasonable prices.)
The company's basic free service comes with 200 voice minutes, 500 text messages, and 500 MB of data. Unlimited talk and text with 500 MB of data will set you back $6.67 a month if you pay annually, or $10.99 if you pay monthly. Additional data costs $0.025 per MB, but the customer must buy the data in advance, so no overages occur.
FreedomPop is not the only company offering this type of service; NetZero has a similar, albeit pricier offer. Republic Wireless has Wi-Fi-only plans starting at $5 a month, and unlimited data plans, including 3G-service, for $25.
Analyze your plan
A lot of people are paying for more data than they need. I'm guilty of this, as I pay Sprint for unlimited calls, text, and data. I make almost no calls, and could probably get away with a fixed amount of data because I'm a big consumer of text, but almost never watch video. I stream a little video and download the occasional podcast, but I could save money by downgrading my plan, and monitoring my data usage to avoid overages.
It's also worth noting that the carriers force customers to pay for unlimited talk and text whether you have any use for it at all. That's a strategic move by the carriers in offering customers something of declining value and charging for it, while making it look like they're offering value. People are using less voice minutes and data has become the real prize, so, of course, carriers give unlimited minutes and charge extra for data.
"This gradual shift from voice communication to data communication will continue to unfold in the coming years," according to U.S. Wireless & Wireline Voice Threat and Opportunities, a February, 2014 report from Insight Research Corporation. "While voice communications will always remain as an essential part of people's daily life and a core business for telecom carriers, it is undeniable that people are spending less time on voice calling, while choosing other digital forms to communicate with others."
Aside from billing you for unlimited services you may not take advantage of, the challenge is that, aside from T-Mobile, which has very clear pricing and no overages, the carriers make it difficult to pick the right plan. In many cases, you'll spend more buying too small a plan than you will buying too big of one because overages cost more than just buying bigger in the first place.
Knowing what's right requires analyzing your usage patterns. You can also compare plans across all carriers using this article from Consumer Reports.
Saving is a science
It's possible to lower what you spend on wireless service; but doing so requires sacrifices and planning. You may have to use a phone that's not quite as cutting edge, or be a little more careful with how you use data.
Switching to an off-brand carrier is a radical move, but the savings can be in the thousands of dollars. You can save. You just have to decide which wireless things are needs, and which are wants that you can give up.
Daniel Kline owns shares of Apple. He incorrectly assumes that as an "important" business writer and analyst he probably needs unlimited data. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
3 Dividend Stocks Perfect for Retirees
Microsoft, Home Depot, and AT&T are dividend-paying stocks that could help make your retirement dreams a reality.
2018: The Year of Lightning-Fast 5G?
For smartphone users, 5G is a massive step forward; 13 cities will have access this year.
Retired? 2 Stocks You Should Consider Buying
These companies deliver both solid fundamental growth and generous dividends.