Unlike "regular" phone plans where you just get billed for how many minutes you use, cell phone agreements generally require you to determine in advance how much you will use your phone. Below we outline the two major arrangements.

Prepaid accounts

Prepaid accounts allow you to pay in advance for a fixed number of minutes. These plans afford you a great deal of flexibility because you can usually use the minutes whenever you want. Their major disadvantage is that the per minute rate is higher than the alternatives.

"Block" minute plans

The most common cell phone services plans today involve the purchase of a "block" of minutes per month. What this means is that you will pay a flat fee for a set number of minutes—the going rate is about 10 cents a minute (a 500-minute block, for example, would probably cost around $49.99). Putting extra charges like taxes aside for a minute, you can spend your entire block of minutes talking on your phone in a given month without paying more than your flat rate. In other words, if you had a 500-minute plan, you could spend up to 500 minutes on the phone for $49.99. Of course, if you only used 200 minutes you will still have to pay the full $49.99. You might be wondering, "What happens if I use more than my allotted minutes." Well, you're not going to like the answer. For every minute that you use above your block, you will pay an extremely high "penalty" rate. This rate can be as high as 25 –50 cents per minute. For this reason, you must give serious thought to how many minutes you want. Are you using your cell phone as a replacement for your normal phone, or is it an "emergency" phone? Many people are opting for the former, replacing their normal phone with this high-tech gadget. Just keep in mind that cell phones, while convenient, are not as reliable as standard phones. As you now know, cell phones depend on airwaves being available for you to use, and if you are not relatively near a station or if the airwaves are overloaded, your phone won't work. Bummer.

Anyway, as intimated above, the most important decision that you will make when you sign up for cell phone service is "how many minutes." Of course, every phone company employee will recite the mantra that you can always switch (i.e., add minutes to your block) later. What they will not volunteer is that such a change will not take effect until the next month. Therefore, if you guess incorrectly and use far more than your block, you could end up wasting hundreds of dollars.

For this reason, you should be extremely liberal when estimating how many minutes to include in your block. Trust us, as frustrating as having unused minutes can be, the alternative is worse. And here are the biggies to consider:

  • You not only have to count the minutes for the calls you've made, you are also charged minutes for all of the calls you receive. Think of it as somebody doing you a favor by letting you use the radio waves; any time you cause a signal to be used, you pay for it.
  • Most calls are rounded up to the highest minute. So a 15-second call will cost you 1 minute. Now, a lot of phones have a groovy little feature that displays how many minutes you've used. DON'T be fooled. This option calculates your total time by seconds, not minutes. Whatever the display reads, your actual use is much higher.
  • If you get a busy signal or no answer, you'll still get charged. Some plans now have it where you'll only get charged if you wait for three rings, or other variations, but think of it this way: you're still using radio waves, so you're still getting charged.

That said, here is a formula that we find works well in deciding how many minutes your should get in your block plan:

  1. Guesstimate the length of time you spend on an average phone call.
  2. Multiply that by the number of calls that you make and receive in one month.
  3. Add another 50 minutes.

So, for example:

Mary spends about 20 minutes on the phone per call.
She knows five people.
She calls each friend once a week.
Each friend calls her once a week.
There are about 4 weeks in a month.

20 minutes per call X 10 calls per week (5 made, 5 received) X 4 weeks per month + 50 "safety" minutes = 850 minutes