Selecting the Right Service Plan

Cell phone service plans fall into two broad categories. The first is a time limited agreement commonly called a “service contract”. Service contracts usually last for 2 years. Termination of the agreement before the contract’s expiration date often requires the customer to pay a substantial cancellation fee. The second type of agreement is time neutral. It’s an “at will” agreement that allows the customer to terminate the agreement at any time without penalty. This type of agreement is commonly called a prepaid plan. Both types of agreements are priced according to the bundle of features they contain.

Service plan pricing is best understood as a matrix. Along one side is the number of people covered under the plan (i.e. an individual or a family for instance). Along the other edge of the matrix is a list of features. Plans are bundled and priced based on the interaction of these two groups. The first step in selecting a plan is to eliminate the features that you can’t afford or don’t need. Your next step is to estimate the usage for each of the features you want. Based on your usage estimate, you can then go shopping for the least expensive plan that covers your needs.

The plan you selection will be greatly influenced by your ultimate goal. For instance, you might want to minimize your long term or overall costs. That approach usually leads to a fixed term service contract that discounts or eliminates all hardware costs. As an alternative, you might want to take a different approach that maximizes your flexibility. That approach points toward a prepaid plan that doesn’t require a credit check, a down payment, a lengthy contract, or cancellation fee when you terminate the contract. The first approach gives you low hardware cost and predictable monthly costs. The second allows you to pay only for what you use.

Rate Comparison Tools

To help you sort through all the service plans offered by cell phone companies, we’ve included links to a number of sites that compare the rates of all of the major wireless providers in the US. Each tool filters the information in a slightly different way so it’s probably a good idea to visit them all before choosing a service that best fits your needs.

MyRatePlan This site automatically calculates the cost of a monthly plan (with or without a contract) for multiple carriers based on the number of lines included in the plan (individual or family bundle), your zip code, the features you want included, your estimated text message volume and the monthly voice and data bundle you need.
MobileBurn This site provides a plan recommendation based primarily on a self selected price range or usage bundle (i.e. call minutes) per month.
BillShrink This site provides a side by side comparison of all the major US carriers based on popular usage and feature bundles.

In addition to these links, most wireless providers offer side-by-side comparisons of competing plans on their own websites. It’s useful to see how each company differentiates itself from its competitors.