Why Are Phone Plans So Expensive?

You can’t get away with dodging a phone plan. If you exist in society, you have a cell phone. Unfortunately, you also can’t dodge paying for a phone plan, which has become more costly by the year. The average phone bill for one person is over $150 per month.

What if you want to trim that price down? Making phone plans affordable requires a knowledge of your own needs and an understanding of the different plans available on the market. With so many cell phone plan options out there, it's not enough to just sign the contract on the first one that looks good. Want to get the best deal? You've got to be ready to compare cell phone plans until you find the right option for you.

How Come Cell Phone Plans Are So Expensive?

If you're staring at your phone bill, wondering how on earth it added up to such a large number, you might be interested in learning more about the factors that affect a high cell phone bill.

1. Phone Financing: If you're paying for your phone through monthly installments as part of your plan, this could significantly inflate your bill. While phone financing allows you to spread out the cost of a new device, you end up paying more in the long run due to interest or fees associated with the financing arrangement.
2. MVNO vs Big Three Carriers: Mobile Virtual Network Operators (MVNOs) often offer cheaper alternatives to the big three carriers (AT&T, Verizon, and T-Mobile) because they lease network infrastructure from these larger companies at wholesale prices. By operating as virtual operators, MVNOs can provide competitive pricing without the overhead costs of building and maintaining their own networks.
3. Unlimited Data Plans: While unlimited data plans offer the convenience of not having to worry about data overage charges, they often come at a premium price. If you're not using a significant amount of data each month, you might be paying more than you need to for your plan. Consider switching to a plan with a lower data cap if you're consistently using less data than your current plan offers.
4. Perks and Add-ons: Many cell phone plans come with additional perks and add-ons, such as premium streaming services, cloud storage, or international calling minutes. While these perks can enhance your overall experience, they also come with a cost. Evaluate whether you're taking full advantage of these extras or if you could save money by opting for a more basic plan without them. Streaming platforms (Netflix, Hulu, Amazon), subscription services, data options, and more are all offered as package deals when you choose an unlimited plan from Verizon, AT&T, or T-Mobile.
5. Unused Services: Take a close look at your plan to see if you're paying for services or features that you rarely or never use. For example, if you have a plan that includes unlimited talk and text but you primarily communicate through messaging apps or social media, you might be able to downgrade to a cheaper plan with fewer minutes.
6. Overage Charges: Conversely, some plans have data caps, and exceeding these limits can result in overage charges. These charges can quickly add up if you regularly exceed your allotted data.
7. Hidden Fees and Taxes: Don't forget to factor in any hidden fees or taxes that may be included in your bill. These additional charges can add up quickly and significantly impact the total cost of your plan. Some carriers include these fees in the advertised price of cell phone plans, but not all do.
8. Number of Lines: If you have multiple lines on your account, each additional line typically incurs its own monthly fee. Multi-line pricing often provides some discount per line compared to individual plans, but it can still add up, especially if you have several lines in your household.

All in all, cell phone plans can vary in price from $15 per month, but can grow to several hundred dollars per month, depending on what you're paying for and which carrier you choose.

How Much Does Adding a Line to Your Phone Plan Cost?

One of the biggest factors that affects your cell phone price is the number of lines. If you want to decrease your phone bill, one great way to do it is by adding a line to your plan, ironically. Some of the best phone plans for two are those that offer multi-line discounts. That means that you might pay, for example, $40 for the first line on a cell phone plan, but the next line added only costs $20 per month.

Big telecommunications companies like AT&T, Verizon, and T-Mobile will offer discounts for plans with multiple lines. Buying a single line on an unlimited plan is rarely a good idea with these bigger companies because you will spend significantly more money than you would if you split it with a friend or family member.

For example, one line of plan comes out to $85, but if you purchase five lines, it comes out to $255, or $51 per person. Family plans give you much more bang for your buck, and popular cell phone plans exploit that.

For individual use, smaller companies like Mint Mobile are a good option because they offer solid pricing options for single-line plans. Mint’s unlimited plan offers three months of service for only $15 per month, which is significantly lower than many other single-line options. However, those carriers don't typically include multi-line discounts, so you wouldn't save money by adding more lines.

How Much Does Extra Cell Data Cost?

The amount of data you use is another cost factor that's potentially within your control. Data is usually purchased as part of your cell phone plan, but it can also be purchased as an extra pack. Each of the big three cell carriers’ primary plans include unlimited data as the main selling point. While unlimited plans refer to unlimited talk and text, many plans accept those as a given and make data the attractive unlimited option.

If you are not interested in setting up an unlimited cell phone plan, it is always possible to purchase data separately. Many prepaid plans give you the option of purchasing a set amount of data that can be recharged at your leisure.

Data can be bought from stores like Best Buy with easy-to-use cards. This works well for people who are not just looking for a plan for their cell phone and want to be able to use the data for other devices.

Should You Use More Wi-Fi and Less Data?

Data is one of the biggest determinants of which plan you should choose. If you can cut down on data usage, then you have the option of purchasing a cheaper plan. For example, a prepaid T-Mobile talk and text plan can go as low as $10 for 1GB of data.

You can bypass using data by keeping yourself connected to WiFi networks instead of using your cellular network. If you limit your internet use to home and the office, where you have safe and consistent WiFi access, you can get away with never using cellular data.

This option is not for everyone, and many people need access to a network outside of their usual WiFi connections. However,  if you have the option, purchasing a plan with minimal data inclusions could help you pay less than what you would with an unlimited cell phone plan.

Are You Financing Your Phone?

The traditional method of purchasing your phone outright is not your only option. You can finance your hardware either through a retailer or a cell phone company through a buy now, pay later system. Financing your phone allows you to pay over time instead of all at once, giving you the freedom to develop a long-term plan for sustaining both a phone and a phone plan.

If you decide to go through a retailer, you can usually enroll in a program that allows you to do so. For example, Best Buy has a system where utilization of a My Best Buy credit card allows you to finance your phone with no interest if fees are paid on time.

Cell companies, on the other hand, have programs like T-Mobile’s smartphone equity plan that lets you set up a payment plan with no credit check. Doing so through your cell provider might also open up options for other perks with your desired phone plan.

How To Find a Phone Plan That Works for You

With all of this in mind, what things do you need to consider when choosing a plan?

First and foremost, figure out whether or not you need unlimited data. Modern phone plans primarily offer unlimited data, but there are some capped data cell phone plan options, too. If you do not need unlimited data, you can go after a much cheaper phone plan. Just be wary of overage fees if you go over your data limit.

It is also important to decide whether or not you want extra perks like subscription services. If you do, you will get a lot for your money with a big brand carrier, but if Netflix doesn't matter to you, then you could save money by opting for a cell phone plan with fewer frills.

The Bottom Line

Understanding your phone plan is key to ensuring you aren’t paying too much. Look at the number of lines you need, how much data you tend to use, whether you want to add perks or not, and at phone financing options. And remember that you can often get great deals on cell phones and cell phone plans by switching to a new provider.

If you're getting overwhelmed at the thought of opening multiple tabs and trying to keep track of all the cell phone plan options and features, let us help. Our free, unbiased Plan Finder can search thousands of phone plan options today, finding the best options for what you're looking for in just a few seconds.

Frequently Asked Questions

How much does the average person pay for their phone plan?

According to JD Power, the average person spends about $144 per month on their cell phone bill. That adds up to $1,728 a year.

What is the downside to prepaid plans?

Prepaid plans can have downsides like limited data options, slower data speeds after a cap, fewer perks compared to postpaid plans, and often lack device financing, requiring an upfront phone purchase.

Why is a cell phone bill so expensive?

Cell phone bills are high due to costs for network maintenance, technology upgrades, regulatory fees, taxes, and included perks like streaming services. Additionally, installment plans for new devices and high data usage charges contribute to the overall cost.