What’s the REAL price?

Ever wonder why your phone plan is advertised as “$29.99/month,” but it’s always over $40? Phone bills (even landlines) have so many hidden charges, it’s enough to make your head spin. You might expect to pay State, City, and Federal Excise tax, but here are some others you might find:

  • State excise tax
  • Universal service charge
  • 911 charge
  • LNP (Local Number Portability) charge
  • TRS (Telecommunications Relay Service) charge
  • Single Bill Fee
  • Detailed Billing fee
  • Access charge
  • Intercontinental Ballistic IntraLATA Surcharge

Okay, I made that last one up, but seriously, this is ridiculous! And those are only the charges you can’t get out of, that add anywhere from 17% to 25% to your phone bill. Reminds me of a TV commercial where the husband comes in with a package in the mail the size of the L.A. phone directory, drops it on the kitchen table with a resounding thud, and says, “It’s the phone bill!”

Arizona ranks 17th in high wireless bill taxes with a State and local rate of 11.98% and a Federal rate of 6.46% (Same in all 50 states) for a combined rate of 18.44%, so we are above the median as far as taxes go.

Why can’t they fold all those fees into the advertised price and avoid the sticker shock? Well… Because then they wouldn’t be able to advertise “$29.99*” in great big numbers and then under the “*” they say (in tiny letters) “Plus applicable taxes, fees, and whatever else we can gouge out of you!” This is also true of many other businesses, such as hotels, airlines, and online ticket sales. One company even tried an all-inclusive “Out the door” price model on it’s website… and lost business to their competitors advertising a lower price, even though their final price was higher. Moral of the story? Sadly, you can’t play an honest game if everyone else is cheating.

People are starting to get really sick of this manipulation, though. That’s one of the many reasons cellphone customers are switching to prepaid service in droves. With prepaid, you buy a month’s worth of service ahead of time, typically for around $40-$45 for most carriers, and the only thing else you pay is sales tax. Granted, the hassle factor is slightly higher because you have to be proactive in making sure your service continues, but look at all the advantages:

  • No contracts!
  • No credit check, in fact, no credit needed because you pay for the service before you use it.
  • No hidden fees, and no surprises. If you need to pay more for some service, you’ll know about it beforehand.
  • You own your phone.
  • No sitting down with someone who wants to sell you lots of additional services.
  • No hour of wasted time reading and signing those contracts.
  • Depending on your needs, often lower monthly charges.

There are a few disadvantages, as well:

  • You may have to pay a lot for your phone, especially if you want the latest iPhone or similar.
  • Your selection of available phones may be smaller, or different.
  • If you run out of money, the grace periods are short, and you’ve got no phone service until you pay again.
  • If you let the service lapse past the grace period, you lose your phone number.

Still, if you stay on top of your finances, prepaid is a very good alternative for many folks. Here’s an idea: Join the revolution and demand a simple quote of the real price! Patronize those businesses that actually tell you how much something costs.

More info:

http://money.cnn.com/2013/07/10/technology/mobile/wireless-taxes/

https://www.fcc.gov/consumers/guides/understanding-your-telephone-bill

http://www.mywireless.org/state-issues/state-tax-rankings/

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