海角大神

Cell phone companies want you to sign a contract. It鈥檚 just a fact of life when picking out a cellular deal.

It makes a lot of sense for the cell phone company. It locks in a revenue stream for them that persists for two years (and has a solid chance of being extended beyond that). The only way that stream can be interrupted is if someone pays an early termination fee, which can be sizeable.

For them, dangling a phone at a low price as an incentive to sign a contract is well worth it.

The problem with a contract is that聽you can鈥檛 easily leap to another provider if you鈥檙e locked into a contract.聽If another provider has much lower rates than your current provider, you鈥檙e either stuck with your current provider or you鈥檙e paying a big fat early termination fee.聽

The solution is to avoid long-term contracts, but contract-free cell phone service isn鈥檛 for everyone. Here鈥檚 how to figure out if it鈥檚 right for you.

The first thing you need to do is聽study your actual cell usage.聽What do you actually use your phone for? Sit down with your last few bills and figure out how much on average you use your cell phone, then round up to the nearest 100 minutes. The lower your number is, the better off you鈥檒l be with a no-contract service.

础濒蝉辞,听do you use data services or text messages on your plan?聽If your use of these is minimal, then a non-contract plan might be better for you.

A perfect example of someone who should avoid a long-term contract is my parents. My parents send somewhere in the ballpark of 20 messages a month and use perhaps 200 minutes of calls per month.

They are perfect candidates for a pay-as-you-go cell phone plan.

The first step they should take is聽shopping around with pay-as-you-go providers.聽What does it cost for a month of their usage with Boost Mobile (which is actually Sprint) or Virgin Mobile? What about Tracfone or other pay-as-you-go providers?

If these providers can offer a lower cost-per-month, then it鈥檚 a no-brainer to switch to them. Not only are they saving money each month, they have the freedom to go elsewhere whenver there鈥檚 an even better offer with another provider.

Even if the prices are roughly equivalent, you鈥檙e better off without the contract聽simply because there鈥檚 no termination fees and there鈥檚 the freedom needed to switch elsewhere if there鈥檚 a better bargain.

Pay-as-you-go isn鈥檛 for everyone. You need to really understand what you鈥檙e actually using (if you鈥檙e a new cell user, starting with pay-as-you-go is a good way to start), but if your usage is low, avoid those long-term contracts and you鈥檒l wind up money ahead.

This post is part of a yearlong series called 鈥�365 Ways to Live Cheap (Revisited),鈥� in which I鈥檓 revisiting the entries from my book 鈥�365 Ways to Live Cheap,鈥� which is available聽at Amazon聽and at bookstores everywhere.