Mellody Hobson: Getting a Grip on Cell-Phone Bills
Aug. 18, 2005 — -- As you get ready to send your children off to college or back to school, it's an excellent time to take a hard look at their cell phone bills and plans.
According to the Cellular Telecommunication Industry Association, the average monthly cell phone bill is now $50.94. But this number is much higher for families with teens, who are often going above and beyond their plans and text messaging with friends via their cell phones at a frenzied rate. According to NOP World Technology, 44 percent of 10- to 18-year-olds in the United States now own a cell phone.
The Expenses
Text Messaging
Text messaging via cell phone has become a teenage craze. Recently, a student in New Jersey rang up a $1,058 bill in a month and a half thanks to the more than 12,000 text messages she sent to her friends throughout the school day.
According to Forrester Research, Americans sent 2.5 billion text messages a month in 2004 -- more than three times a many as in 2002. And these text messages are not cheap. Many plans charge between 5 cents and 10 cents for each message a user sends and receives. A typical teen sends about 21 messages a week -- at 10 cents a message, that adds up to more than $109 a year in fees!
Downloading Extras
In addition to text messaging, teenagers are increasingly accessorizing their cell phones by purchasing ring tones of popular songs and buying mobile games. In 2003, the ring tone industry reached $300 million in the United States, with people under the age of 25 representing the largest segment of buyers. While some ring tones are free, others can cost $2.99. Teenagers often download games to their cell phones at a cost of $3.99 to $5.99 -- another significant extra that can add up quickly.
Extra Minutes
According to an ABC Consumer News report, more than 16 million cell phone users in this country go over their minutes each month, mostly because they are not aware of how many minutes they have left. This additional talk time can cost anywhere from 30 cents to 45 cents a minute. Extra minutes can quickly add up, and depending on the wireless carrier and service plan you purchase for your teen, your bill could easily double.
The Solutions
Go Prepaid
One way to curb excessive cell phone use is to opt for a prepaid plan for your teen. With this type of plan, you buy the phone, activate it and then prepay for a certain number of minutes. As you use the phone, minutes are deducted from your plan until you have none left, at which point you can decide to purchase additional minutes.
This system prevents your teen from exceeding the amount of cell phone time you have agreed upon and allows you to easily budget what you are spending on cell service. While there are many benefits to prepaid plans, there are some downsides. For example, you often end up paying more per minute (e.g. 25 cents per minute with a prepaid plan versus 8 cents per minute with a service plan). And depending on the plan, you may not be able to roll over unused minutes month to month.
Family Plans
If your teen is doing most of the talking to your family, you may want to purchase a family plan offered by most carriers. For example, Verizon's Family SharePlan includes unlimited minutes for all calls between family members. The Verizon Family plan starts at $59.99 for the first two lines and an additional $9.99 a month for an additional line. T-Mobile offers a similar option for $69.99 a month and includes two T-Mobile phones, 1,000 whenever minutes, free roaming and long distance, and unlimited T-Mobile to T-Mobile minutes. Keep in mind that if your teen is running up the minutes with friends, this is not a solution.
Show Them the Bill
The best way to alert your teens to the charges they are ringing up on their phones is to simply show them the cell phone bill. Highlight the specific charges to prove to your teen how much their cell habit is costing the family. Often, teens are in the dark when it comes to how much things really cost, so this exercise could put an end to cell phone overuse and open a dialogue to other family finance concerns.
Pay to Keep Track
Another option is to keep track of your minutes through a service offered by many providers or a third party. One company, MinuteCheck, will alert you when your minute balance is running low. MinuteCheck charges an annual fee of $24 and will send a text message to your phone as well as an e-mail to your account with a minute warning.
Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is "Good Morning America's" personal finance expert. Ariel associates Matthew Yale and Aimee Daley contributed to this report.