Let’s talk about your cell phone bill. You should be paying between $15-$30 a month for unlimited talk, text, and a generous amount of data. But it’s all too easy to be paying closer to $100 a month. If you’re overpaying, taking action to curb your cell phone bill will be one of the easiest and most powerful money-saving actions you’ll ever take.

Why does it matter? Imagine you’re paying $65 a month and can get that down to $25 a month: that’s $40 a month saved, $480 a year, and $4,800 every ten years. And it’ll probably only take an hour of your time. Fixing your cell phone spending leak is one of the top power savings moves, easily a $240 an hour activity.

This post will explain how traditional cell phone plans trap you into high costs, what the alternatives are, and what you need to know to make the switch.

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Traditional Plans: An Expensive Trap

First, let’s talk about how the major carriers (like AT&T, Verizon, T-Mobile, Sprint, or whatever the big names are in your country) bleed your wallet. Typical mainstream plans these days start at about $65 a month, which is far too expensive. These plans offer unlimited data and various other features, with more bells and whistles as you pay more. The major carriers will also sell you a phone with a two-year installment plan. There’s no contract or cancellation fee, but it’s the installment plan that traps you. If you want to change carriers, you have to pay off your phone. Most people don’t, or can’t, so they’re stuck with a costly plan.

Let me say that again: the installment plan is the trap. Even when one of these companies offers a “free” or discounted phone, the deal is they’ll slowly forgive the cost of the phone over two years, but if you leave, you have to pay for it.

The Alternatives: Prepaid Plans and MVNOs

There are two alternatives to the traditional, expensive cell phone plan: prepaid plans and MVNO plans. Prepaid plans are sold by the major carriers, usually advertised on a different part of their websites for much lower prices. MVNO stands for Mobile Virtual Network Operator, which is a fancy way of saying “reseller”. You’ve probably heard of these companies: some of the more well-known ones include Mint, Cricket, Straight Talk, and Tracfone, and there are dozens more. These companies don’t run their own cellular networks (that’s where the word “Virtual” comes from); instead, they piggyback on one of the major networks but offer cheaper plans to their customers. So, for example, if you purchase a plan with Mint, you’re using the T-Mobile network, but your plan, billing, and customer service come from Mint.

Both prepaid plans and third-party MVNO plans are solid choices. In either case, the plans are cheap, and it’s easy to walk away. You generally bring your own phone with these plans, or if you buy a phone from the provider, you’ll pay for it upfront rather than with an installment plan. I’ll talk more about phones later.

With a low-cost plan, the amount of data you need drives the price (unlimited talk and text are commonly included). You can find plans that offer unlimited data, but unless you absolutely need it, you’ll save more by choosing a lower limit. To give you an idea, you might pay as little as $15 for 1 GB a month. I personally pay $25 a month for 8 GB of rollover data (AT&T Prepaid). You can look at your phone bills to get a sense of how much data you typically use. One nice perk, many of these plans don’t restrict hotspot usage, which the mainline plans often do.

How to Escape Your High-Priced Plan

There’s much more I could say about the mainstream plans and their cheaper counterparts above, but to keep things moving, let’s talk about how you make the switch. You’ll need to understand two things: how phones work and what the steps are to change carriers.

How Phones Work

If you’re going to escape from your overpriced cell phone plan, you need to understand how to “bring your own phone”. This knowledge will help you move your existing phone to a lower-cost provider and will also help you replace your phone independently (without going through a carrier) when the time comes.

There are three concepts to cover: SIM cards, number porting, and unlocked phones.

Every modern cell phone has a tiny, removable computer chip called a SIM card in it. SIM stands for Subscriber Identity Module, and, as the name suggests, its job is to tell your phone what its number and network are. For example, a SIM card might say “512-555-1234, AT&T”, and whatever phone you put that SIM into will assume that identity.

Bought a new phone? Move your SIM card from your old phone to the new one, and instantly that new phone takes on your number and connects to your network.

Changing to a low-cost carrier? They will send you a new SIM card. When you pop that into your phone, it will join the new network…and get a new phone number. Since you presumably want to keep your current number, this is where number porting comes in. Number porting is the process of transferring your phone number from one carrier to another. You usually do this on the new carrier’s website, and the process will re-assign your old phone number to your new SIM card.

Moving your number from one phone to another, or changing from one carrier to another, is something you can do yourself. But your phone must be unlocked. Typically, when you get a phone on one of those installment plans, the carrier will lock your phone (prevent it from switching networks) until you’ve paid it off. When you’ve done so, you can ask customer service to unlock it, which they can do by clicking a few buttons (it’s a software setting, not a physical lock).

A word on compatibility: Most (but not all) carriers use the same cellular technology, which means most phones work on most networks. There are some exceptions, and going into the technical details is beyond the scope of this article. If you’re unsure, the safe bet is to look for low-cost plans that use the same major network you’re currently on. For example, if you’re currently with Verizon, look at Verizon’s prepaid plans or MVNOs that piggyback on Verizon, and you’ll avoid any issues.

Bonus tip: Did you know that many countries offer tourist cellphone plans for visitors? Next time you’re in a foreign country, consider buying a local plan – you can usually do it right at the airport! It’s often dramatically cheaper than paying roaming charges. You pop out your SIM card, put it somewhere safe, pop in the local SIM you just bought, and away you go. Later, when your trip is over, simply put your regular SIM back in!

Making the Switch

Now that you know how to move your phone from one network to another, you’re ready to make the big, money-saving switch.

Here are the steps:

1. Understand your situation: Look at your past few bills to understand how much you’re paying, how much data you use, and whether you currently owe money on your phone.

2. Decide where you’re going: Look at your current carrier’s prepaid plans and search for MVNO alternative plans to find a new plan you like. Reviewing specific companies is beyond the scope of this article (I don’t necessarily endorse the ones mentioned above). If you Google “best MVNO Verizon” (or whatever carrier you have now), you’ll get pointed in the right direction.

3. Pay off your phone and get it unlocked: If you still owe money on your old phone, you’re going to have to pay it off. If you can afford to do this, even though it may be a high upfront cost, it’ll open the door to savings month after month. You should be able to pay off and unlock your phone on your current carrier’s website or by giving them a call.

4. Order the new service: Go ahead and buy that new plan you like. The new company will ask whether you want to buy a new phone or a SIM card with it. Buy the SIM card.

5. Install and activate new service: When that SIM card arrives, put it in your phone. If you’re not sure how to do this, a quick Google search will reveal the procedure for your phone. Once you’ve installed the SIM, activate your new service and port your number. (Each provider will have specific instructions on how to do this.)

6. Cancel your old service: Get in touch with the old company and make sure they’re stopping your old plan.

That’s it! Each of those steps should only take 5-10 minutes, so the total project only takes about an hour of your time.

Buy Your Phones Independently From Now On

The money-saving benefit to avoiding traditional cell phone plans doesn’t stop with lowering your monthly cost. You’ll also save a small fortune on the cost of phones themselves! 

Maybe your current phone is on its last legs, and it’s time for an upgrade. Or perhaps it’s still got a year or two of life in it. Whenever the time comes to buy a new phone, you no longer have to go through your carrier. You can buy your phone independently, and this opens up a lot of options.

For example, you could buy the latest and greatest model (directly from the manufacturer or through a third-party reseller like Amazon). Or you can be a clever fox and buy an older generation or a refurbished phone for a steep discount. Just make sure whatever you’re buying states that it’s an unlocked phone (which is typical for independently sold phones).

Bonus tip: If the only reason you’re not happy with your current phone is the battery life has diminished, you can replace the battery for far less money than buying a new phone!

Bottom Line

There’s no reason to over-pay for phone service, and you’ll be surprised how much you can save, even if you have a family plan or a corporate discount. Reducing your cell phone bill will put real money back in your wallet every month from now on.

Stay tuned for a companion post in the works, a real-world case study in which I helped my partner dump AT&T’s plans to save over $130 a month. And if you have questions or want to share your success story, please reach out in the comments!