Did You Know Prepaid Cell Phone Bills Charge LessTaxes?

Ever wonder what exactly those charges under "Taxes, Fees and Surcharges" on your cell phone bill actually are? These charges can amount to 10% or more of your contract cell phone bill and it becomes very important to try to understand exactly what your are getting charged for.

Cell phone taxes, fees and surcharges vary by cellular service provider and by state and it's hard to get an actual number on these charges. Here are some tax rates and definitions which can be used  to estimate your taxes and fees.

Cell Phone TaxesSales Tax - Sales tax rates will apply for every state that charges for a sales tax. These charges can be levied against recurring monthly charges, local usage, toll usage, or roaming usage. If your state does not charge for sales tax, no sales tax rate will be applied. Important note: The sales tax rate is based on the mailing address of your bill.

City Tax - If your city charges a tax on sales, that rate will also apply on your monthly phone bill based on recurring monthly charges, local usage, toll usage, or roaming usage.

County Tax - If your county charges a tax on sales, that rate will also apply on your monthly phone bill based on recurring monthly charges, local usage, toll usage, or roaming usage.

Federal Excise Tax - Telephone services are subject to a 3% federal excise tax on a contract cellular customers recurring monthly charges. This tax is collected by the cellular service provider and remitted to the IRS. (Internal Revenue Service) This tax does not apply on phone sales, accessories or surcharges.

Annual Regulatory Fee - Telecommunications companies are assessed an annual regulatory fee (sometimes called a Federal Regulatory Charge) by the federal government. This results in a one time annual charge per cell phone number. As of October 2002, it was .24 cents.

Cell Phone Surcharges and Fees
Activation fees - Every cell phone service provider charges a one time fee for activating the cellular service, assigning the cell phone number and turning it on. The standard one time fee is usually $35.

Local number portability - Cellular phone numbers are becoming Portable, which equates to an increase in cell phone surcharges. Fees vary by the service provider, but extra monthly fees will be charged for number portability. Since this fee won't be broken out on your cell phone bill and lumped in "fees in surcharges", it's hard to pinpoint an amount. Carriers such as Verizon Wireless and T-Mobile do not charge for this service as of yet. We do know Sprint plans to charge a monthly fee of $1.10 for this service (Including number pooling) - which is probably a good guide for other carriers that do or may charge.

Telephone number pooling - Carriers share a 'pool' of telephone numbers that they can assign to a new cellular customer. This way, no number can be assigned to two customers at anytime, and it's more efficient. To maintain this pooling resource, the fee is again passed on to the customer. Since the fees are lumped in fees and surcharges, it's hard to gauge an accurate monthly fee for this service. Between .30 - .50 seems the norm per provider.

Emergency 911 Service - Included in every cell phone bill is a monthly charge for emergency cellular service. Fees range from .40 to .75 per provider. This surcharge is again a fee that the government charges the cellular providers that then gets passed onto the customers.

Universal Service Fund Surcharge - All cellular service providers are required to contribute to the Federal Universal Service Fund. The universal service fund subsidizes programs for schools, libraries, and rural health care providers. This monthly surcharge equates to 1.2% on your recurring monthly charges.

Directory Assistance - Each provider charges a fee per call for directory assistance. To avoid this per call charge, use the yellow pages if possible.

Telecommunications Relay Service Surcharge - All cellular service providers are required to contribute to the Federal Telecommunications Relay Service (TRS) Fund in order to finance how relay services get provisioned. Telecommunications relay services enable hearing and speech impaired persons to send and receive messages to and from persons whose telephones are not equipped with specialized telecommunications equipment. This monthly surcharge is 0.073% on your recurring monthly charges.

Cancellation Fees - Contract plans require a year or two commitment with every cellular offer, if the contract is broken the fees for cancellatin could be $200 or more.

Did you know that Prepaid plans charge only state sales tax and one time activation fees. This can provide a significant cost cutting measure for any budget.

Lowering Your Cell Phone Bill

Cell phone bills are scary-complex, with lots of different components that are changing all the time. There are new downloads and new data plans and new pricing plans coming out constantly, so unless you're doing an analysis every month on your bill, you don't know where you're overpaying.

What should you to look for when they are reviewing your cell phone bills?

Look and see what your overage charges are—whether they are accurate and whether there is a better, more cost-effective plan you could add that would absorb those overages. Make sure you're getting the use of your rollover minutes.

Check to see if you're eligible for discounts and make sure you review your cell phone call details. Are 40 percent of your calls to one or two numbers? Your carrier may offer free calling to selected numbers or a feature that can be added that allows for free calling to selected numbers.

And watch out for charges that are incurred because of unrequested features added to your lines.

What should you do if you see cell phone charges that you don't understand or you think you haven't authorized?

If you don't understand something, question it. Call the carrier and make them explain it.

If you're not communicating well with a representative, hang up and call back. You may have to call three times to get somebody who is experienced enough to know what I'm talking about.

Or you could end all of this hassle and sign up for a prepaid cell phone plan with unlimited talk, text and data and be rid of all these headaches. Even better get free cell phone service by getting 5 other friends to sign up for unlimited service.  

Fixing a Water Damaged Cell Phone

It is sometimes possible to fix a water damaged cell phone using a cloth, heat, or some rice. These methods do not always work, but they might if the water hasn't seeped too deeply inside to the inner workings of the phone. For this reason, the chances of repairing a water damaged cell phone may be greater when repair attempts are made immediately.

The longer you wait to try and fix your cell phone, the more likely it is that the phone will not be repairable.

If you put your water damaged cell phone back together and it won't turn on, it is likely that some water has gotten down inside the phone. When this happens, you may still be able to repair it using rice. You can remove the battery and SIM card from the phone once again and place all three components into a bowl filled with rice.

This may work because rice is very absorbent, and it sucks in almost all water it is exposed to. Leave it all in the bowl overnight, and in the morning your phone may be working again because the rice will have absorbed any excess moisture you were not able to get out.

You could also use heat to dry out a water damaged cell phone. If the rice method either did not work or you don't have rice on hand, you can take the phone apart and lay all its pieces outside in direct sunlight for several hours. The heat from the sun may completely dry out the inside and outside of the phone and its parts.

If it is raining or the sun is not out, you can place the phone directly on top of a heat vent or use a blow dryer to get the same results.

Keep in mind that if you try to take the phone apart and remove more than just the battery and SIM card, you run the risk of voiding your warranty with your cell phone provider or phone manufacturer. If all of your attempts at repairing your phone are unsuccessful, you will likely have no choice but to take it to your cell provider or to a place that repairs cell phones to get it fixed.

Unless your phone is very valuable, the cost of repairing the phone might be higher than what you paid for it, and you might be better off to just buy a new one. It may be beneficial to purchase insurance from your cell phone provider to protect you from having to pay much, if anything, out of pocket to fix a water damaged cell phone.

Your Cell Phone Has Been Stolen...

If your cell phone is stolen, the first step is to suspend your account so people cannot make expensive calls or texts to others using your phone. Depending upon the type of service you use, you may either need to call the service or use their Internet reporting service to stop the line from working.

Most believe that this should be done as soon as possible, since people can immediately begin to make expensive calls from your phone. Failure to report promptly if your cell phone is stolen could mean you are responsible for some of the calls made by the thief.

Many cell phone companies also sell additional insurance that can help one cover these costs if your cell phone is stolen. Some cell phone insurance also can cover the cost of replacing the phone. If you purchased your phone and contracted with a service at the same time, you may have to spend significantly more to replace the phone.

Cell phone companies often offer excellent deals to new customers, but for established customers, a brand new cell phone can come at a high price, especially if is replacing an elaborate or expensive phone.

Cell phone insurance may also be purchased from private companies and help to protect call costs and materials if your cell phone is stolen. However, be certain not to pay for double insurance. For example, some home and renter’s insurance, and some auto insurance may cover replacement of a cell phone.

If your cell phone is stolen from your vehicle or home, you may be eligible for replacement under one of these plans. However, if your cell phone is stolen when you are outside, you may not have coverage under these plans.

If your cell phone is stolen and is a prepaid phone, you can still request that service be stopped to the phone. However, your cell phone will stop working the moment the thief runs out of pre-purchased minutes. In these cases, you might want to risk the minutes for a day or two, to see if anyone has merely found your cell phone and wishes to return it to you.

It’s a good idea to keep your home number listed in your call list, so that someone who finds a lost phone has the chance to return it to you.

With many prepaid services, replacing the cellphone is less expensive, provided the model you use is fairly simple. It may not be worth it to purchase cell phone insurance. More expensive phone models may make insurance well worth the cost.

The cost of replacing your phone may not be worth the insurance expense if your cell phone is stolen. However, you should still report the theft to both your cell phone service provider and your local police department if your cell phone is stolen, at least within a few days, since the company can then make it impossible for someone to have your number, receive your calls, and purchase new minutes on the phone.

About one in four cell phones are lost, damaged or stolen. Cell phone insurance often covers you not only if your cell phone is stolen, but also if it is lost or damaged. You should treat a lost phone as if your cell phone is stolen. Report the loss and hope for the best. It is often possible to reinstate the line if your phone is returned to you, or if you find it on your own.

Does Your Cell Phone Company Pay You?

One cell phone company does...

Refurbished Cell Phones vs. New...Does It Matter?

Is it a good idea to buy a refurbished cell phone? It all depends. A refurbished cell phone is one that has been returned to the factory from a cell phone company and rebuilt, usually to new specifications. Sometimes, a favorite model will no longer be manufactured new, but a customer can get a refurbished one.

A refurbished mobile phone should, in all respects, work exactly as a new phone. This is probably more likely to be the case when the refurbished mobile phone does not have many complex features, such as a camera, personal digital assistant and Bluetooth® capabilities.

Cell phone customers routinely upgrade their mobile phones every couple of years or so, and the old ones have to go somewhere. Some are discarded, if they are no longer compatible with the cellular system, but many are sent back to the factory to be refurbished. This is also the case for phones that malfunction.

Whether buying a refurbished mobile phone is a good idea depends greatly on the manufacturer. Reputable makers usually produce a good product, but this may not be the case with "off" brands. A consumer should also always ask his or her cellular service provider if they have many refurbished phones returned for malfunction.

Sometimes, the manufacturer will provide a warranty of some description, but the consumer should insist on one from the service provider.

The question of getting a refurbished mobile phone may be crucial for someone who needs a phone at a moment's notice and cannot afford to risk having a refurbished cell phone malfunction. On the flip side of that coin are elderly customers who have a good phone that they like.

Many elderly customers don't want to have to learn how to use their phones all over again, and if a refurbished mobile phone in their preferred model is available, they may want one.

Price is another consideration. No customer should be asked to pay top dollar for a refurbished cell phone. This is not fair. Even if a phone has many features, if it is refurbished, the customer should not have to pay what she would for a new phone. However, cellular service providers are aware of this, and they often offer a refurbished mobile phone as one of the free models for upgrade or for signing a service contract.

How Do I Get Free Cell Phone Service?

You as a customer + 5 customers unlimited plan= FREE CELL PHONE SERVICE

or You + 3 unlimited customers as a representative = FREE CELL PHONE SERVICE + EXTRA INCOME

The Long Term Advantages of Prepaid Cell Phone Plans

No commitment means no subsidy
Since the nature of prepaid cellular service revolves around no contracts, it makes sense that companies do no subsidize the cell phones.. Much of the time, this means you're paying full retail price for a phone, which can now get up into the $300 and $400 range for the top models.

The companies' logic is that they don't want to give out a subsidy only to have you break away from their service in three months.  Since there's no way to penalize a prepaid user -- since they never agreed to a contract -- there's no way to get back a monthly premium for an expensve cell phone.

The best offer in this regard comes from companies who sell discounted new cell phones or refurbished models. The cost of the unlimited talk, text and data from the postpaid plans is quite significant.

Take a close look at the numbers. Lightyear offers unlimited talk, text and data for $59.99 per month which equals $1119.88 for one year. Even with the cost of their most expensive Smartphone which is $414.99 the savings is still $245.01 for a year compared to ATT and $305.01 compared to Verizon.  The difference with Sprint is not as significant $14.93 and Verizon's data service is limited to 2G.

But this is with the assumption that Lightyear's most expensive phone is purchased. Their phones range in price between $39.99 -$414.99. The savings can be extreemely significant.

There is more however...free service? 

The Huge Draw of Postpaid Plans:The Price of Phones

Q:Free or cheaper phones, but what is the real cost?
A: A huge draw for postpaid cellular service is that most providers give away phones when you sign a new cell phone contract. There are certain models made available for these promotions, and they bring in the subscribers. Even if a new customer wants a different phone, a subsidy is applied to that purchase. That is, the service provider picks up some of the tab for your new phone. Thus the reason for credit checks.

Beyond the attractive marketing opportunities this presents, there's an overarching reason why carriers subsidize new cell phone purchases. Simply, in postpaid service, you're tied down to a contract, the norm being two years in length.

Q: So how, exactly, does this work?
A: Here's the idea behind subsidizing phones. For whatever reason, cell phones are rather expensive. This might be because of high mark-ups somewhere along the production line, or it might be that the phones actually cost that much to produce.

In any event, it's tough to get people to drop serious money on a cell phone. Not only do you have to pay for service on top of it, but they're especially fragile.

Think of your TV service. It's a similar situation in that you have to buy a TV, and then buy the cable service. However, TVs are less volatile than cell phones. They stay in one plays, rather than being trucked around in your pocket or purse. Because cell phones are mobile, they're far more apt to break. So this either means paying more for insurance, or paying for another phone down the road. Neither is very attractive -- especially considering how we've made cell phones an essential instrument in our daily lives.

Somewhere along the line, cell phone companies figured out that the best way to entice customers was to offer a discount on phones. But if they're taking a hit in that department, they have to make up for it somewhere else. Hence, the two-year contract.


Over the two-year term, the company figures to make back its investment in the subscriber's phone. This is also why they employ early termination fees. When you cancel before your contract is up, you're repaying the company for the subsidy they provided you.

But do you want to be locked into a plan just because the phone appears to be free or cheaper?

Is it really cheaper to be part of a postpaid plan, especially if the service is not the best? In the big picture postpaid plans are significantly more expensive and cell phones are a necessity in today's world.

What to do?

2 Types of Plans: Postpaid vs Prepaid Cell Phones

Most wireless service is sold on month-to-month or one-, two- or three-year contracts, with a monthly fixed cost that includes a set amount of useage or unlimited plans. Before signing a contract, you must go through the carrier's credit check. Every month you get a bill based on the cellphone plan you choose and any extras you used that month (e.g. minutes used above your plan, text messages, etc. etc. and so on).

If you decide to cancel service, it will cost you! Most providers have an early termination penalty. This can range from a flat fee to a charge per month remaining on your contract. This gives you a limited window of opportunity to cancel service without any penalty if you find out that a provider just doesn't meet your needs.

There is an alternative plan that allows you to change the number of minutes and other provisions: Prepaid Cell Phone Plan.

You won't be under contract and you don't have to pay a monthly package fee for having the service. You can buy the airtime as you need it (with some exceptions). And you do not have to pay a deposit for service.

Prepaid is also a way of learning about your usage patterns before committing to a long-term

monthly billing wireless contract.

Advantages of prepaid cell phones:

• No contract to sign, no long-term commitment
• No monthly monthly bill to worry about.
• Better cost control. You know exactly how much you will spend.
• No hidden fees.
• No credit checks needed. Perfect for the credit challenged, since monthly billed plans require credit approval.
• Great if your usage varies from month to month.
• No security deposits. Some monthly plans may require a deposit.
• Topping up your account is easy and you can do it in many ways, at any time, by going on-line, by phone, bank machine or with a prepaid card.   

Prepaid cell phones are ideal for:

• People who don't want to be locked into a year-long contract
• First-time cellular buyers who don't know how many monthly minutes they should sign up for.
• People who don't want to go over their budget
• People with damaged or no credit history
• Occasional users
• People who want to buy their children a phone for emergency use
• Travelers