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Tip #5: Optimize your cellphone bill

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This is tip #5 of the Save $1,000 in 30 Days Challenge.

Today’s tip is to optimize your cellphone bill. Many of us (including me) pick a cellphone plan, then never check to see if it’s the right one for us based on our usage. Because the average cellphone bill is about $50, that’s $600 per year of money you can optimize. Perfect.

angry-cellphone-kid.jpg
Today, I’m going to show you two ways to cut your cellphone bill: one easy, one hard. And remember, this tip doesn’t just apply to cellphones: You can optimize your spending on nearly any other subscription you’ve got.

Optimizing your cellphone bill — the easy way
First let me say, if you still have a landline, the easiest tip is to call your wireless company and bundle it all into one plan — or get rid of your landline altogether.

Anyway, when I went to buy a new cellphone a couple months ago, I picked the unlimited everything plan — unlimited voice, unlimited data, unlimited text. I also set a 3-month check-in on my calendar to go back and analyze my spending patterns so I could cut back on my plan if needed. This is a technique I use a lot: With any usage-based services (e.g., web apps or cell plans), I’ll pay a little more up front so I can monitor my usage, then downgrade to the appropriate plan after 3 months.

You should also know that, according to a recent survey by J.D. Power and Associates, “people who text message, e-mail, and download files on mobile phones spend $14 a month more than people who don’t.” Do you really need all that stuff? Could you try going a couple months without it?

It pays to look at your actual usage and switch to a plan that better fits your needs. If you’re only using 150 text messages, you can probably downgrade to the “200 text messages/month” plan. As you get used to the new limit, add a calendar reminder to check in on the 15th of each month and make sure you’re not wildly over for the first few months.

Optimizing your cellphone — the harder (but more rewarding) way
Cellphone companies have this wildly curious business model of acquiring tons of customers through very expensive means (e.g., national advertising), then churning through them by treating them horribly. Yet even they know that it’s cheaper to retain an existing customer than to acquire a new one. You can use this “customer acquisition cost” in your favor. Here’s how:

1. Find comparable plans for your usage on other cellphone networks. For example, I’m with AT&T, so I’ll investigate Verizon, T-Mobile, and Sprint by going to their websites. Write down how much they each cost, how many minutes you get, and any other benefits.
2. Call your current cellphone company. To make it easy, here are the phone numbers:

AT&T: 1-800-331-0500
Verizon: 1-800-922-0204
TMobile: 1-800-T-MOBILE
Sprint: 1-866-866-7509

3. First, be nice. Ask them what better plans they have to offer you.

You: “Hi, I was looking at my plan and it’s getting pretty expensive. Could you tell me what other plans you have that would save me money?”
Them: Blah blah same plans as on the website blah blah
You: “What about any plans not listed on the website?”
Them: No, what we have is listed on the website. Plus, you’re on a contract and have an early cancellation fee of $XXX
You: “Well, I understand that, but I’d be saving $XXX even with that cancellation fee. Look, you know times are tough so I’m thinking of switching to [COMPETITOR COMPANY]. Unless there are any other plans you have…? No? Ok, can you switch me to your cancellation department, please?”

Note: What you really want is to be switched to their “customer retention” department, which is the group that has the ability to retain you by giving you a bunch of free deals. You can either ask to be switched directly to the customer retention department, or play a game and hope that by asking for “cancellation,” you’re actually transferred to retention. Play around with a few phone calls and see what works best.

When you get to the customer-retention department, ask for the same thing. This is when you pull out your competitive intel on the other services being offered. If Verizon is offering something for $10 less, tell them that. That’s $120 savings / year right there. But you can do more.

You: “Listen, you know times are tough and I need to get a better deal to stick with you guys. You know and I know that your customer acquisition cost is hundreds of dollars. It just makes sense to keep me as a customer, so what can you do to offer me this plan for less money?”

Notice that you didn’t say, “Can you give me a cheaper plan?” because yes/no questions always get a “no” answer when speaking to wireless customer-service reps. Ask leading questions. You also invoked the customer-acquisition cost, which is meaningful to retention reps. Finally, it really helps if you’re a valued customer who’s stuck around for a long time and actually deserves to be treated well. If you jump around from carrier to carrier, you’re not a worthwhile customer to carriers.

One final thing: People get scared that if they go to the cancellation department and try to negotiate, they’ll get their account canceled without really wanting to do that. There are two things to remember about negotiating your wireless bill: (1) You have a MUCH stronger position if you’re actually willing to walk away and switch to another plan, and (2) your account will never get canceled until you say the final word. You can negotiate for 3 hours and walk away if you want.

Use this technique on virtually any subscription you’re paying. Businesses want to keep customers and are willing to negotiate — but since most people don’t, they’re leaving money on the table.

Total savings: $20-$600

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Additional links
Threatening To Cancel Saves Man $65.52 On AT&T Phone Bill

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Last thing to do
1. Leave a comment on this post describing how much you’re saving with this tip. People have already saved thousands of dollars taking the 30 Day Challenge.
2. Want to submit your own savings tip? Submit a money tip here.

If you liked this tip, check out my Premium tips — one long, tactical tip per week. Save money or get a 100% refund.

scrooge

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122 Comments

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  1. This is the first tip that i think might save us, however its not quite as much as what it states. My husband and I together will save $15 by this as what we are doing is dropping the internet, but adding texting onto his phone. (Internet is 20, texting is 5) – our cellphone plan is already pretty optimized – we have a family plan, and the plan itself w/out the texting and internet extras is $60 for both of us. They dont even offer that plan anymore (their current family rate structures have more monthly minutes, but costs more)

    As for the other tips, we already followed all of those, so I haven’t seen anything large from them. We are in the process of selling items on craigslist, however we were doing that before (we have a huge glut of items from when we joined households) so i dont know if it counts towards these overall savings. (on top of that, nothing has actually sold since we started following these tips).

  2. I did this a couple of years ago. I bundled my Cable, landline and broadband internet to save $30 a month, with unlimited local and long distance on the landline.

    I waited for my cell contract to expire, then I went to prepaid phones. I was paying $100 per month for 2 phones before. I’m paying on average on prepaid phones $20 per month.

    Keep the tips coming Ramit, they are great for those who aren’t already practicing them.

  3. Alright, this is a tip that I am going to really get into. I have three lines on one plan and the 2 year contract is up in December. So the timing is perfect for me to do a bit of checking and negotiating.

  4. Rob – which provider did you go with? I’m moving to another state and our Verizon plan is past the two year contract and on a month to month basis. I’m considering picking up pay as you go for at least my phone, since I never use it, but maybe even both phones. Do you like the new service? What state are you in?

  5. This is an excellent tip, Ramit. Your negotiation strategy is insightful. Nice job. I am already practicing the other suggestions, but it is always good to hear them again so you remain consistent. You are doing a great job on this project. Keep it up.

  6. So I’ve printed out two plans that I think will save me 245 to 159 a year. I’m going to stop by AT&T during my break to discuss the plans with my sales rep. I always ask for the gentleman who signed me up we are on a first name bases. I feel like I get better customer service by always requesting the same rep if he’s not there some one else is sure to take care of me well because if not they know I will discus it with my regular rep. I currently save about 19% because they give my company an employee discount. I thought I had already brought down my bill as low as possible and I hope billshrink.com proves me wrong. I’ll let you guys know how it goes.

  7. I think that this is a really good idea. I have a really fiesty mother. When I was younger, she used to call cell phone customer service lines and cause so much fuss that they would give her unbelievable deals. She has been getting unlimited conversation for $99 four years ago. This is a more formal technique that I will definitely abide by. Thanks for the tip.

    Caleb
    http://www.mefinanciallyfree.blogspot.com

  8. I just called AT&T and got on the cheaper rate plan for seniors which will save me $10/month. Not half bad considering I really didn’t want to cancel the account.

  9. I was paying 50.00 a month for a cell phone that I rarely used because everyone called me at home or at work. After my contract was up with TMobile, I stayed with them but went to the prepaid plan. It has saved me hundreds of dollars. Once you reach the 100.00 mark on the plan you become a gold member and never lose any unused minutes plus every time you add minutes they give you 15% more as a bonus. I only add minutes when I’m almost out and so I spend less than 10.00 a month. I realize this plan isn’t for everyone but for people who don’t text and really just want a phone for emergencies and convenience, this is a great plan that will save you money.

  10. Oh yeah and I should mention I’m not a senior, they say the rate plan is for seniors but when I was on the line with the cancellation people they gave it to me when I asked. The first line people would not.

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