8/5/2011 4:58 PM ET|
Stay wired without staying broke
Whether it's your cell phone, pay TV or Internet service, being connected costs, and you could be paying too much. The right strategies can reduce excessive charges.
Staying connected -- with each other and the world -- costs more than ever.
We're spending steadily more on phone service, even as many people drop land lines and switch to cellphones and Voice over Internet Protocol, or VoIP. The average digital cable TV subscriber now pays $75 a month. The cost for decent broadband Internet service is likely to rise as providers institute caps to limit data access -- and charge for overages.
The costs of all these connections can easily approach $200 a month for a typical family and exceed $300 for those who choose premium services.
Here are some strategies for making sure you're not paying more than you need to:
Cable and satellite subscriptions are set up to soak you.
Sure, you'll get a great rate -- at first. A few months later, though, part of your deal will expire, and you'll start paying more. A few months after that, your bill will jump again as the rest of your deal expires.
Pay-TV providers offer those great deals upfront because most people will continue to pay the bill as it rises, said Bob Sullivan, MSNBC's Red Tape columnist and the author of "Stop Getting Ripped Off."
"They count on our laziness," Sullivan said. "They know we hate little things about change, what economists call switching costs, like losing track of where our favorite programs are on the dial. Is ESPN 206 or 35? . . . Even the most vigilant among us let it go for a few months before we complain. All this is baked into their business model."
TV providers also salt your bill with other fees and charges you may not need to pay, such as:
Boxes you don't need. If you have an HD-ready set, you don't need an HD converter box, but your television provider might not tell you that. You also don't have to lease the service's digital video recorders -- you can buy your own, although you may still have to pay a service fee, which could offset the savings.
Installation charges. These are usually waived when you sign up for new service, but keep an eye on your bill, because the charge could sneak in later. A month after our U-verse bundle was torturously installed, not one but two charges for "installation of AT&T U-verse Voice" popped up on our bill, totaling $174. I was on the phone instantly (I had the customer-service number memorized by this point) and got credits to offset the charges.
Early-termination fees. Some providers, including DirecTV, are taking a page from cellphone companies and instituting whopping early-termination fees if you discontinue service. The providers say the fees are necessary to compensate them for the high costs of installing pricey equipment, but they can come as a huge shock to subscribers who didn't realize they were under contract.
One of my readers who lost her job canceled her DirecTV service to save money, only to face a bill of more than $300 because she was only a few months into a two-year service agreement. Others have faced fees after their equipment was destroyed in fires, tornadoes, floods or other disasters.
Your strategy: Carefully review your bill every few months. Compare what you're paying to what competitors, and your own provider, are advertising for new subscribers. Call and ask the provider to match the lower price. The good news is that television service is a competitive business now, and discounts are yours for the asking.
"I have actually put Post-it notes near my TV that let me know when my discount rate is about to expire," Sullivan said. "Then, when the date arrives and my bill is about to jump from $30 to $60, I call and threaten to switch. That usually gets the bill back down to $30 for another three months. Total savings: $180 for about 30 minutes' work. Anyone who can afford to turn down a $360-an-hour job right now, please raise your hand."
Before signing up for new service, carefully review all contracts and agreements for the "escape" clause, including how to cancel service and whether that cancellation would cost you. Talking your way out of early-termination fees can be tough, so the best strategy may be to avoid them by not signing up for service or upgrades that include them.
Or you could consider cutting the cord altogether. Many people are discovering they can watch all the television they want with a broadband connection and a set-top antenna to catch local broadcast stations. If you're not ready to go cold turkey, you may be able to save a small fortune by opting out of premium channels and settling for the provider's most basic level of service.
The Census Bureau says the average U.S. household paid $92 per month for phone service in 2007, the latest year for which statistics are available. That was up from $76 in 2001 (an increase sharper than the overall rate of inflation). Most of the 2007 total -- $50.67, on average -- was for cell service.
Chances are that your phone bills, especially for your cell, are larded with government fees and taxes. As I wrote in "Governments getting more fee-happy," cell service is a prime target for revenue-hungry agencies -- so much so that government-mandated taxes and fees now constitute an average 16.3% of your bill, according to the Tax Foundation, a Washington, D.C., think tank.
But there are plenty of other pesky fees on your phone bills that you may be able to do something about. Such as:
"Cramming" fees. The head of the Federal Communications Commission says cramming is epidemic, with up to 20 million households facing unauthorized charges on their phone bills for services they didn't order. The fees can be one-time charges or monthly subscriptions, ostensibly placed on your bill by "aggregators" on behalf of "third-party providers." The three layers involved -- the third-party provider, the aggregator and the phone company -- often result in a lot of finger pointing when the fees are questioned.
The fees could be for voice mail, Web hosting, donations, long-distance service and various types of subscriptions (for ringtones or daily horoscopes, for example). The fees could show up on your bill under a variety of labels, such as "service fee," "service charge," "other fees," "voicemail," "mail server," "calling plan," "membership," "monthly fee" or "minimum monthly usage fee."
Crammers typically get away with it because most people don't monitor their bills and the amounts are often small, often $1.99 to $2.99. But not always.
Columnist Donna Freedman discovered, to her horror, that she'd been paying $19.99 a month for ringtones she'd never ordered. As she put it, "I wouldn't know how to download a ringtone if it meant the firing squad."
Your strategy: Scan your phone bills at least every few months. If you find a questionable charge, ask your phone company for an explanation. If it's for a service you didn't authorize, immediately ask the company to remove the charge.
If the charge was initiated by a third party, ask that company to remove the charge. But if that doesn't work, appeal to your phone service provider.
If all else fails, file a complaint with the FCC for charges related to telephone services between states or internationally, with your state public-service commission for telephone services within your state, and with the Federal Trade Commission for non-telephone services on your telephone bill.
To file a complaint with the FCC, click here or call 1-888-CALL-FCC (1-888-225-5322) or, for TTY, 1-888-TELL-FCC (1-888-835-5322). You can also write to the Federal Communications Commission, Consumer and Governmental Affairs Bureau, Consumer Inquiries and Complaints Division, 445 12th St. S.W., Washington, D.C., 20554.
Roaming charges. We've gotten so used to national calling plans that roaming charges may come as a shock. Step foot out of the country, and you can get walloped.
"I was just charged over $46 in roaming fees for the week I was in Jamaica," one of my Facebook fans wrote. "I had my phone on for maybe five minutes the entire time to see if it would work (which it did not, so I turned it off). Sprint credited my account."
You'll really be sorry if you have a smartphone and fail to turn off its data functions. Your phone can still be downloading emails and Facebook updates, racking up stupendous bills, since without an international data plan you'll pay by the megabyte.
You don't have to leave the U.S. to get creamed, however. You can get hit with roaming charges if you wander into an area where your provider doesn't have cell towers.
Your strategy: Set your phone to "network only" to prevent inadvertent roaming. (Ask your provider how to do it, or simply type your phone's name and "turn off roaming" into a search engine to find instructions.) If you plan to use your phone outside the country, ask your provider to set you up with the appropriate international plan. You can cancel the plan when you get home. If you have a smartphone, turn off data roaming or get an international data plan along with your phone plan, since otherwise you'll pay dearly for every email you download and every website you visit.
Early-termination fees. These much-hated fees have gotten worse in recent years as carriers have jacked up the penalties for canceling service if you have an "advanced device" such as a smartphone or tablet.
AT&T's regular $150 termination fee soars to $325 if your deal included a smartphone or tablet. Verizon boosted its $175 early-termination fee to $350 for advanced devices.
The fees are typically prorated, so they decline the further into your contract you get. At AT&T and Verizon, the fee drops by a few bucks a month. At T-Mobile and Sprint, the $200 termination fee declines in chunks over time until it hits $50 in the final months of your contract. You can check providers' websites or call and ask how much of a fee you would face for canceling service.
Your strategy: You typically have 14 to 30 days to get out of your contract without an early-termination fee. So make sure you can put the phone through its paces in the first few weeks to see if you have decent coverage where you need it, MSNBC's Sullivan advised.
You also may be able to avoid an early-termination fee by paying full price, instead of the promotional price, for your handset. Or consider prepaid phones, which don't have contracts.
Rather than pay an early-termination fee, see if you can find someone to take over your contract. A friend or neighbor who needs service might be willing, or you can list your contract for "sale" on Celltradeusa.com for a $19.99 registration fee.
You also can try talking your way out of a fee, but you'll need to be determined and have good reasons why you should be let out of your contract -- reasons that are the carrier's fault, such as spotty coverage, dropped calls or bad customer service.
Data usage fees. "All you can eat" data plans for smartphones are being replaced by tiered service. AT&T was the first to eliminate unlimited data plans in favor of tiers: 200 megabytes of data for $15 a month, two gigabytes for $25 or four gigabytes for $45. Verizon Wireless just switched from a $30 unlimited data plan to tiers that cost $30 for two gigabytes, $50 for five gigabytes and $80 for 10 gigabytes. Users with Internet-compatible phones can pay $10 for 75 megabytes per month. T-Mobile's plan charges $10 for 200 MB per month, $20 for two gigabytes, $30 for five gigabytes and $60 for 10 gigabytes. Sprint is the last major carrier to offer unlimited data plans, although that could change.
The clear danger is that you'll exceed your tier's data usage cap and rack up unexpected fees. At AT&T, that will cost you $15 for each 200 megabytes (or part thereof) that you consume. Verizon charges $10 to $100 per extra gigabyte, depending on the device used.
Your strategy:Obviously, you should match your plan to your expected use. This data calculator at T-Mobile can help. You also should set up text or email alerts with the provider so you're notified when you're closing in on your data limit. Streaming videos and music will chomp up data, so consider using a Wi-Fi connection instead. Turn off apps that you're not using, particularly social apps that constantly update, and shut down your browser when you're not actively using it.
Random "gotcha" fees. Activation fees are classic junk fees that can often be waived if you simply ask. The same is true for "new handset" fees, which typically run $18 to $35 and are imposed when you get a new phone. Neither of these fees is remotely necessary and carriers know it, so they'll often delete them if you push back. Another fee to avoid: directory assistance at $2 a pop. Program your phone to call Bing 411 (1-800-246-4411) or 1-800-free-411 (1-800-373-3411) instead. (Bing 411 is owned by Microsoft, the publisher of MSN Money.)
Finally, watch out for "premium texts." These are texts that trigger subscription services (jokes, horoscopes, ringtones) or that are charged higher rates, such as interactive voting during TV shows. If you want to avoid these gotchas, ask your carrier if you can disable premium texting.
More than two-thirds of U.S. households have broadband Internet service, and half of those (or one-third of U.S. households in total) consider their connection to be a necessity, according to a recent Pew Research poll.
So we're ripe for the plucking. Internet service isn't yet the fee magnet that phone and television services have become, but you still need to be on your guard.
Early-termination fees. One-fifth of consumers recently polled for an FCC survey said their Internet access included an early-termination fee, but most didn't know how much that fee was.
The result can be an unexpected charge if you switch providers, so this is a detail worth knowing.
Your strategy:Call your broadband provider to find out if you're under contract and what, if any, fee you might face for canceling service. In the future, ask about early-termination fees before signing up for service.
Data caps. Broadband providers tout their blazing speeds and how quickly you can download, upload and stream. Use their services too enthusiastically, though, and you may face extra fees.
AT&T, which introduced data caps to the wireless world, imported the idea to broadband. Its DSL customers are limited to 150 gigabytes of data per month, while U-verse subscribers are capped at 250 gigabytes. Stream one Netflix movie too many and you'll pay $10 per 50 gigabytes over that limit.
Since most of us don't really know what a megabyte or gigabyte really represents in terms of media consumption, The Washington Post put it into perspective: "150 to 250 GB equals about three to five hours of streaming high-definition Netflix video a day. It would be about eight to 14 hours a day of video viewed on Hulu."
Your strategy:You probably don't need one at this point, as most users won't be affected -- at least not yet. As the availability and quality of video available increases, though, more people could hit the caps. Also, analysts predict other carriers will impose limits, which could well affect more consumers.
Inadequate service. This cost isn't as tangible as a fee that shows up on your bill. But you pay in frustration and wasted time when your broadband connection doesn't deliver the speeds you were promised or suffers frequent breakdowns.
The FCC recently released the first nationwide review of residential broadband service. Its less-than-surprising conclusion: Some technologies, and some Internet providers, offer much better service than others.
In terms of technology, fiber-to-the-home services, like Verizon Fios, delivered 114% of advertised speeds, while cable-based services delivered 93%, and DSL poked along at 82%.
Some cable and DSL companies are still piling too many customers onto their networks, dramatically slowing speeds at peak times. Of the major providers, Cablevision scored the worst at delivering consistent service through peak demand times and at one point delivered only half the advertised speeds during the FCC's test.
At the other end of the scale, Verizon Fios consistently delivered the best service. Comcast scored well, while Time Warner Cable, Insight and CenturyLink ranked in the middle.
Your strategy:The FCC recommends matching your broadband subscription to your actual use. For example, if all you need is basic Web browsing, email and VoIP (digital phone) service, just about any broadband provider will do. You should shop on price and resist efforts to sell you faster tiers of service.
If you want to stream videos, you'll benefit from the consistently faster service provided by fiber and cable broadband.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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If your cell phone works at your home skip the normal land line. Maybe get that $20 a year plan that you need to plug into a computer to get to work. I know a few who have done that and are extremely happy with unlimited domestic for practically nothing.
Internet - If you're not a heavy downloader you might be able to stand the weakest DSL plans and pay far less than cable. And if you can't stand there there is a company that offers "unlimited" wireless plans slightly cheaper than cable at nearly comparable speeds (though select markets). Regardless of what you do buy your equipment (modem) and save that rental fee.
I don't have cable, don't want it.
I do have DSL and am happy about the cost @ $28/mo.
I have a prepaid phone... of the Blackberry variety. I pay $25 every 90 days to retain my account balance. I can call, text, and get web. The cost per use is higher than if you had unlimited usage, but for me, in the long run, I'd rather pay higher per use than get stuck with a service that goes mostly unused. I don't like talking on the phone and no longer really have anyone to talk to. Most of my family has passed. I use it for emergency and the occasional work call. Because I pay for each text message and let people know that I do, it cuts down on the stupid, meaningless back and forth. In other words, don't text me unless you really have something to say. I won't text you back unless you need me to or I need to. The web is also a charge, but a charge I'm willing to bear when I happen to need to check something and don't have access to my laptop.
With this method, I also have no additional fees, no surprise charges, no late fees. I pay $25 and get $25 worth of usage and with each use, I know how much it will cost.
All this means that I pay about $200/yr for cell service. That's a lot of money saved that can be put to better use elsewhere.
There is a problem with trying to save money here for me: It depends on the state you live in.
Where I live DSL is unavailable, but I can get cable internet, or dial up, which is too slow. I guess I'm stuck with cable for Internet.
Cell phones are even worse, all CDMA, no GSM cell signals available at all Leaves me two providers to choose from only. The same is true with a landline, two providers only, so I can't win with this option either.
I can get Dish or Time Warner for TV, but no Direct TV due to trees and other things...
I'm tempted to go strictly with Internet for streaming TV and hook up VOIP phone provider, but I need to find a way to end the contracts.
just because I'm a non-conformist, I'm going against this headline. I will endeavor to stay broke and not be wired.
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