8/24/2012 2:15 PM ET|
The real costs of a smartphone
Apps, accessories, media, data plans -- it all adds up when you have a smartphone in your pocket. Some smart tips if you must own one.
Half of mobile phone users in the U.S. owned a smartphone in February 2012, compared with 36% a year earlier, according to Nielsen. That means a lot of people are either new to the sticker shock of a smartphone or have yet to experience it. (You conventional cellphone users are a shrinking breed; two out of three people who acquired a new mobile device recently chose a smartphone over a conventional cell, according to Nielsen.)
Here are some of the costs you need to watch for, as well as some ideas for keeping your smartphone spending under control.
Conventional cellphones can give you Internet access, email, a music player and a camera. Smartphones offer all that and much, much more. They tend to have larger displays and typing keyboards (either virtual or attached). Their advanced operating systems allow you to access multiple email accounts, create and edit documents, and use an incredibly broad universe of apps to do everything from playing Angry Birds to filing your taxes.
The upfront difference in costs is fairly substantial: A conventional cellphone from a wireless carrier typically costs around $20, but you can pay up to $150. Smartphones, on the other hand, usually cost $200 and up, although some older models and "entry-level" smartphones are less than $100.
Another potentially big expense: memory. It's fairly cheap when you're adding it to your computer. It's usually not when you want a smarter smartphone. The basic iPhone 4S with 16 gigabytes of memory starts at $199. For 16 additional gigabytes, you'll pay an extra $100 -- 50% more. Boost the memory to 64 total gigabytes and the phone's price climbs to $399 or more. Memory matters if you use your smartphone intensively, though, so you might want to upgrade from the bottom tier if you want thousands of songs, lots of movies or a bunch of memory-intensive apps on your phone.
If you lose or damage your smartphone before your two-year contract is up, however, you'll discover the real cost of your handheld -- which is usually between $500 and $700. Wireless carriers heavily subsidize the cost of smartphones to get you to sign up for those contracts.
The data plan
With your conventional cell, you picked a voice and texting plan. Now you need to add a data plan to use your smartphone's extra features. Depending on your carrier and how much data you expect to use, these plans will set you back $15 to $80 a month. Go over your limit and you'll rack up "overage" charges as well.
Fear of these charges is what leads people to buy a much bigger data plan than they actually will use. A study by Cisco found the average amount of data use per smartphone in 2011 was 150 megabytes a month, up from 55 MB per month a year earlier. Now, averages can be deceptive, and your mileage may vary considerably. Still, it looks as if the most popular data plans -- which typically provide two or three gigabytes for about $30 a month -- are overkill for many users, even if average usage once again nearly triples this year.
The high cost of smartphones leads many users to pay $4 to $8 per month to insure their device, but Consumer Reports will tell you the coverage usually isn't worth it. For one thing, you'll typically pay a $25 to $100 deductible, and you're unlikely to get a new phone. Instead, you'll get one that's been repaired or refurbished. (Consumer Reports said only 17% of insured buyers it polled got a new phone after theirs broke, and only 3% got new units after their phones were lost or stolen.)
Smartphone users will spend an average of $56 on accessories in 2012, predicts ABI Research, or twice the average outlay of conventional cell users. Cases, extra chargers, Bluetooth headsets and other goodies can add up fast.
The apps and downloads
You can spend a fair amount of money -- from 99 cents to more than $4.99 -- at a time. At least some of that money gets wasted: According to research firm Localytics, 24% of Android apps and 21% of iPhone and iPad apps are used only one time after download.
You also may find yourself downloading (and paying) for more movies, shows, music and books, now that you've got an entertainment device in your pocket.
Four in 10 adults download and pay for digital products or services, such as apps, movies and music, according to a recent study by the American Institute of CPAs. (Not all are downloading to smartphones; the survey covered computer, television and satellite radio as well.) Americans buy an average of five digital songs per month, five movies or TV shows, two apps, two games and two eBooks, the study found, spending an average $38 a month.
Now that you know what you're up against, here are ways to save:
Ask yourself whether you really need a smartphone. If you use your phone mostly for talking and texting, you may not want or need to move up to a smartphone. The National Endowment for Financial Education warns that "tech gadgets can overload a tight budget," so you shouldn't jump on the trend if you don't have money to spare.
Consider an older or less powerful version. Today's dazzling new device is tomorrow's bargain. Consider the iPhone 3GS that so many people stood in line to get three short years ago. Today, you can get it for free with a two-year AT&T contract. You also might consider the "entry-level" smartphones, but realize that they typically come with slower processors, fuzzier cameras and lower-resolution displays.
Or consider paying full price. It's counterintuitive, but many users could be better off paying the full price for a smartphone and opting for a pay-as-you-go plan from a provider, such as Cricket or Virgin Mobile, rather than tying themselves to a two-year contract.
Get the right data plan. Here's what you need to remember: You can change your plan any time you find yourself using less or more data than you expect.
If you're new to smartphones, consider opting for a smaller data plan and carefully monitoring how much you're actually using each month. (Your phone usually keeps track of this information; any wireless rep should be able to tell or show you where to look.)
If that's too much effort, you should at least review your bill to see if your data usage is what you expected it to be and if you need to dial your plan up or down. A service like BillShrink can help you analyze your usage and find the best plan.
Stick to hot spots. Here's your new mantra: "No Wi-Fi? Don't stream." Streaming movies, television shows and music eats up a lot of data. So can email programs or apps that are set to update automatically. To keep a lid on costs, use data-intensive programs only when in a Wi-Fi hot spot, and disable automatic updates for other programs.
Skip the insurance. Since you're unlikely to get a new phone, you likely would be better off saving the premiums and buying a used phone if yours breaks or disappears. Or you could do what Consumer Reports recommends: Keep your old phone, so you can reactivate it if necessary, and use it until you qualify for another free or subsidized phone.
My take: Insurance is best reserved for catastrophic expenses you can't afford to pay out of pocket. If you really couldn't afford to replace your current phone, then you've bought too much phone.
Accessorize carefully. It's convenient to buy your case, headset and other accessories where you buy your phone. It also can be really expensive. You'll almost certainly get a better deal on Amazon.com, eBay or another online outlet. If you want to buy local, you can check out what's available at your neighborhood mall kiosk or swap meet. Be absolutely sure the device is compatible with your unit; a charger or case that works with one version of a smartphone may not fit with another.
Look for free and discounted apps. Deal sites such as DealNews and tech sites such as Lifehacker regularly alert their readers to temporary sales on apps. Always read reviews before you buy, and consider listening to the experts on which apps are worth the money (Lifehacker curates a list here. Another tip from Lifehacker: If an app is temporarily free and you think you might want it someday (but perhaps not right away), download it and then delete it from your device. You can later download it again for free, even if it's gone back up to its regular price.
Resist the upgrade urge as long as you can. Smartphones are awesome. That's why so many of us have them. Once you have one, though, virtually every new version will offer some compelling new feature to entice you to upgrade. But every upgrade means you'll spend more money, use more data and (probably) have to buy new accessories. Remember, once again, that the latest and greatest will soon be upstaged by something even better. Waiting out the upgrade cycle a time or two can really pay off in less interim spending -- and ultimately a cooler phone, when you finally do give in to the gotta-have-it urge.
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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