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Lesson 3: Understanding the Cost of Cellular Service

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Understanding the cost of cellular service

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When it comes to shopping for cellular plans, the number of possible plans and options can be overwhelming, and choosing the best plan will depend on your individual needs. However, here are some general things to understand and consider when shopping for a cellular plan.

Understanding your cellular service

Cellular service is the network used to make phone calls and send text messages. With cellular plans, companies charge customers each month to use a certain number of minutes or text messages. However, most companies today offer plans with unlimited amounts of texts and minutes.

If you have a smartphone, you'll generally need to buy a monthly data plan in addition to cellular service. Cellular data allows you to wirelessly access the Internet, download or upload information and pictures, and power some apps.

A data plan is important because you'll be using your smartphone in many different locations and situations. If you're near an actual Wi-Fi hotspot, your phone can use it to connect to the Internet. However, Wi-Fi isn't always available. Therefore, you will need data for any situation in which you're away from Wi-Fi, such as using a GPS app while driving or accessing your email while camping.

Note: You may face heavy fees if you exceed your plan's data, text, or minute allowance.

Paying for your phone

Buying your phone is usually the most exciting part of the shopping process, but it can also add a significant amount to your bill. There are usually two options when it comes to purchasing a phone from a cellular service provider:

  • Pay for the phone up front: Depending on the type of phone you plan to purchase, this can be a big chunk from your wallet. However, some carriers will offer rebates or discounts if you sign up for monthly cellular service. The other advantage of paying for your phone up front is that you own the phone and are free to sell it or upgrade to a new one at any time.
  • Get a payment plan: Most carriers are now allowing customers to pay for a phone a little bit each month. This can be a good idea if you don't have the money initially to buy the phone you want. Some carriers will also offer free or low-cost upgrades after you've successfully paid a certain amount of months.

Regardless of which way you might decide to purchase your phone, you may also want to consider some additional costs like purchasing insurance for your phone in the event that it's lost or damaged.

Adding it all up

Now that you know the different things to consider when selecting a cellular plan, let's take a look at an example of a bill to see how it can all add up:

  • Unlimited talk and text cellular service: $45
  • 10GB of data: $30
  • Smartphone ($648 financed over 24 months): $27
  • Taxes and fees: $5
  • Total bill per month: $107

At $107 per month, this would add up to $1,284 per year for your smartphone and $2,568 by the time your phone is completely paid off. Whatever you choose to purchase, be sure to keep overall cost in mind in order to make a decision that's a good financial fit for you.