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Disadvantages Of Cell Phone Plans: 5 Tricks And Scams Carriers Use To Rip You Off

Updated on July 4, 2011

Formerly a luxury, cell phones are now a must have necessity in today's society. You need a cell phone. Choosing the right cell phone plan can be tricky. Consumers are often lured into signing a contract with enticing words like “unlimited” and “4G”. Did you know that these terms are lies? Yes, scams. Cell phone carriers are not exactly an honest bunch. All carriers suffer from some degree of complaints. In a struggling economy, we are all trying to save money. It doesn't help that cell phone carriers nickel and dime you until your $69.99 plan comes over $80. All of the major US carriers lie or cheat you to some degree. Is this fair?

Lets look at the 5 common lies and scams that you may be a victim from. Some are obvious and some not so much.

1. Cell Phone Insurance

The first trick when signing a long term contract is cell phone insurance. Cell phone insurance can range between $5 to $10 per month added on top of your cell phone bill. The sales pitch is great. “For only $5 extra per month, you are protected against water damage, drops, hurricanes and other things that may break or damage your phone.” Sounds like a good deal right? Wrong. I've had insurance of my phones in the past. They are a waste of money. When you get a new cell phone, the first thing you do is buy a case and a screen protector. Everyone I know does this. A case will protect your phone from surface damage and small drops. Cell phone insurance and their sales pitch prey on people's insecurities. If you are responsible and respectful of your phone, you won't need insurance. If you do find yourself breaking your phone after 16 months, don't expect to get a new model. Yep. After you wrestle with customer service on whether or not you “deserve” a replacement, you will get a brand new “old” phone. The same phone.

Seeing how new phones are constantly coming out, you will have to settle for that outdated phone that you probably dropped on purpose. Cell phone insurance is pretty much a waste of money. If you are super clumsy or perhaps you suffer from vertigo, maybe insurance is a good idea. Signing up for $5 insurance means you are paying $60 extra per year on your contract. If you are responsible with your device, just get a case and call it good.

2. Fake 4G

The second scam is a fairly new one. Every major cell phone carrier is marketing the “4G” they currently have or will have in the near future. Sprint was the first to make this claim in the US with their WiMax “4G”. AT&T and Verizon are pushing their version of 4G called LTE (Long Term Evolution). And T-Mobile is claiming that they have the nation's largest 4G with their HSPA+ (High Speed Packet Access Evolved) network.

There are 3 major organizations that are qualified to standardize 4G. The ITU (International Telecommunications Union), 3GPP (3rd Generation Partnership Project), and the IEEE (Institute of Electrical and Electronics Engineers). ITU have set an official standard of what is considered “true 4G”. They have awarded the standard to WiMax Release 2 and LTE-Advanced. The current crop of “4G” is not true 4G but more along the lines of 3.5G. That $10 extra you are paying on top of your EVO 4G is not even considered true 4G. That MyTouch 4G? Pure marketing. Buzzwords sell and carriers are jumping on this one. Don't buy into the hype.

3. Unlimited. In Other Words, Limited

The third “scam” cell phone carriers abuse is “Unlimited Data”. When we think of the word, “unlimited”, we think “not limited” or "without limitations". Sorry, but that is a myth. Apparently cell phone carriers use a different dictionary. The Oxford Bullshit Dictionary. Most carriers will have fine print that states the cap on data usage. It varies for each carrier and they are subject to change but currently, Sprint has a data cap of 5GB per month. After using 5GB, Sprint will throttle your usage. Essentially, this means they will lower your data speed. I am not happy about this. When I pay for unlimited data, I expect unlimited data. They call this “fair usage”. I call it false advertisement.

I have never gone over the 5GB limit though there were months where it was close. One of the main reasons I signed the contract was having the peace of mind knowing that I wouldn't have to worry about data. Data caps on “unlimited data” plans are ridiculous. I don't care if people are abusing their network by downloading massive files or tethering. They paid for the same thing I am paying. If you can't deliver it, don't advertise it as “unlimited”.

4. Death and Cell Phone Taxes

It seems where ever you go, you can't escape taxes. This is the fourth “scam”. You pay a tax on goods and services. Cellular phone service is not immune. Not only do I have to pay a sales tax (depending on state), but I also have to pay a state 911 tax and a mystery tax called “Other taxes/fees”. Why do I have to pay a 911 tax when I can get 911 service for free on a toll phone? The carrier should pay this “tax”. And what is this mystery tax that is draining me $.52 a month? When you go to the store and buy a computer, you pay for the computer and sales tax. Imagine you get charged a mystery tax. Carriers are scamming millions of consumers each month with these ridiculous taxes and fees. It's bull.

5. Misc "Fees"

The fifth and final “scam” is related to taxes. Fees and surcharges. When you enter into your contract, you need to pay an “activation fee”. Most places don't tell you this until you are fully committed into the plan and phone. This is annoying and deceiving. After you paid a $30 activation fee, they slam you with monthly fees and surcharges. $2.39 for Federal Serv Assess Non-LD, $5.23 for State Gross Receipts Recovery, $1.98 for Administrative Charges, and $.80 for Regulatory Charges? Goddamn. I mean, do I have to pay for their toilet paper too?

Not only is the surcharges crazy, but if I want out of my contract, I have to pay an ETF (Early Termination Fee). This is $200 per line with Sprint. ETF are usually $150-$200. Carriers justify this fee because of they subsidize the phones. This is why you see phones for $99 with a 2 year contract. Without this fee, they would have to sell every phone at full retail price. Many people criticize ETF for being inherently anti-competitive. ETF's locks you into a carrier for a long time. If you are unhappy with a carrier's service, ETF forces you to be “loyal”.

Final Thoughts

On my monthly $129.99 Sprint Family Plan, it comes to $155.23 with all the taxes, fees, and surcharges. That's $25.24 more than what I signed up for. That's almost a 20% increase! With all of the fees, taxes, and surcharges, prepaid cell phones are becoming an increasingly attractive option, especially in these troubling times. I've listed 5 “scams” cell phone carriers used to rip you off. Unfortunately, this is not a complete list. Thanks for reading. Feel free to add any more dirty tricks and scams you've experienced.

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    • profile image

      Spruce 5 months ago

      You know Verizon ripped me off by telling me that they would pay $650.00 per line to switch to them. It's a lie I'm now stuck owing Sprint that I thought Verizon were going to pay for switching. The language was not clear in the contract! Watch out for these cell phone carries, because they are all scammers. They want to keep the consumer confused.

    • profile image

      Washed Hands 4 years ago

      of this crap too. A $60 plan has a $40 line assess fee? So what’s the $60 for. A $100 dollar plan with taxes and fees to match. Sadly, lots of folks fall for this and need to wake TFU. $60 dollar plan my a$$.

    • profile image

      Done 4 years ago

      Done with sprint can't afford going t mobile no contract purchased phones off qvc easy pay I will save atleast 110.00 a month

    • Adroit Alien profile image

      Adroit Alien 5 years ago

      Sorry RMH, it seems like prepaid is the only option for now. Canada has a semi-prepaid option for Virgin Mobile where you can put money down and such but not here in the states...

    • profile image

      RMH 5 years ago

      great article! THANK YOU! But what you failed to write about is, what other option are available? Prepaid can't be the ONLY option.

    • profile image

      Ooo 5 years ago

      Great funny and informative article.

    • profile image

      Jefffrommilwaukee 6 years ago

      Smilingman...The they will wreck your credit! Ain't capitalism wonderful?

    • The Smiling Man profile image

      The Smiling Man 7 years ago from USA

      Lol "Oxford bullshit dictionary".

      Misc fees and contracts is the reason I went prepaid. I've owed T-Mobil $200 for a good while now, and they can keep on waiting.

    • CoolTechToday profile image

      CoolTechToday 7 years ago from New York

      Thank you for those tips!