How to choose a cell phone plan

How to choose a cell phone plan

Shopping for a cell phone plan can be as difficult as choosing a new car. How fast do you want to go? Do you want to buy, lease or pay installments? There are a lot of options out in the market, and they change often.

When selecting a plan, you have to consider three factors to determine what plan is right for you and how much the plan will cost:

  • service
  • phones
  • phone payment plans
  • taxes and fees

Choosing a Cell Phone Service Plan

Cell Phone service plans include talk, text and data. Most plans these days offer free talk and text. Phone data plans are another story.

How to decide on a cell phone data plan?

The average person uses about 4.5GB of data a month. That’s up more than a third from the 3.3GB the average person used in 2016. This is largely because people are continually doing more on their phones – watching more videos, streaming more movies and TV shows, downloading more songs and playing more online games.

So should you choose an unlimited cell phone data plan? Not necessarily. If you stream one video a day, a plan of 6GB or so is probably enough for you. If you often have access to Wi-Fi, you may not need unlimited data. But if you’re using your phone to listen, watch and play throughout the day – and using data to do it – an unlimited phone data plan might be best. You’ll have more data, and you won’t pay overage charges if you exceed your monthly data limit.

All major carriers now offer unlimited data plans, and competition among them has driven prices down. However, no unlimited plan is truly unlimited. All carriers reserve the right to reduce your data speed during times of network congestion if you’ve reached your data limit for the month.

The best way to determine what your data needs are is to check your phone bill, which should tell you how much data you’ve used each month.

How many lines?

Just like going to dinner or Disneyland, it’s usually more expensive to be a family. But it’s cheaper when you share a cell phone plan. The more lines you have, the less you pay for each line. You can even share a “family” plan with friends. Keep in mind, though, that you’ll probably have to share data among all members of your plan.

Think of a shared phone data plan as a pool of data, with each line drawing from the pool. Let’s say your plan has 6GB of shared data. Any line can use any amount of data until all 6GB is used up for the month. At that point, overage charges will apply. If you’re opting for a “family” plan to lower costs and simplify billing, your best bet is to opt for an unlimited talk, text and data plan.

Cell phone payment plan type comparison chart

 Phone Installment Plan2-Year ContractLeaseUpfront
Industry InfoThe industry standard and most common planUsed to be the industry standard, almost obsolete today (CREDO Mobile still has some 2-year contract plans)Newest option, available with a limited number of carriersRarest option, not very popular with consumers
How you pay for your phoneCost of phone is split over 24 monthly paymentsPhone is often free; 2-year service contract is requiredMonthly payment to rent the phoneYou pay for the price of your phone
Pros Monthly payments will drop once phone is paid offMonthly payments are usually lowerAllows for always having the most current phone model Your monthly payments are the lowest of all the plans
ConsHigher monthly payments until phone is paid offPrice of phone service often increases substantially once 2-year contract is over, and phones often won’t be the latest and greatest modelsMust pay for any damage to phoneHigh upfront costs
Who is it good for?People who will keep the same phone for a number of yearsPeople who can’t afford to buy a phonePeople who want the latest and greatest models all the timePeople who want the lowest monthly payments

Choosing a Cell Phone

Choosing a cell phone plan is as much about personal preference as it is about technology and usage. Will you be using the phone as a GPS device, for shopping, to watch movies or play games? You’ll definitely want a smartphone, which is really a small computer.

Do you only need to talk, text and take the occasional photo? A flip phone might be right for you.

Check our post How to choose a cell phone for more details on that topic. 

Choosing a Cell Phone Payment Plan

There are several different cell phone payment plan options. We’ll discuss the top four, although installment plans are by far the most popular.

The Installment Plan

This is the most common plan. An installment plan allows you to pay for your phone over time, usually a period of 24 months. You don’t sign a contract, though you must pay the phone off before you can leave your carrier. Once you’ve paid for the phone, it’s yours, and your monthly bill will go down after your final payment.

The 2 Year Contract

This phone payment plan option is no longer available with most service carriers. In this scenario, you are under contract with a particular carrier for 2 years of service. In return, you get a highly discounted or free phone. While you often pay an initial lower price, over the long run, you often end up paying more.


A recently introduced phone payment plan option is leasing. You essentially borrow a phone from the carrier and pay to use it. Leasing plans usually allow you to upgrade your phone more often. You won’t own “your” phone unless you pay a fee to buy it. And if it breaks and you don’t have insurance, you’ll be responsible for the full price.

Upfront Purchase

A final option is to buy your phone outright. This will always be the most expensive option upfront, but you will own your phone. You’ll also pay a lower monthly bill.

Taxes and fees

When you sign up for a cell phone plan, what you really want to know is how much you will be paying monthly. . Unfortunately, this number is not easy to determine. Why? Taxes and fees.

Your taxes and fees are determined by federal, state, and local laws. Where you live plays a big part in how much you pay.

Additionally, your first monthly payment is often more expensive than your subsequent payments because you’re probably paying an activation fee and possibly putting a down payment on your phone. State and local taxes also come into play here. For example, California requires residents to pay the sales tax for the phone upfront, even if you choose an installment phone payment plan.

With so many options out there, it is important you take all these factors into account when choosing a cell phone plan.