Is A Free Cellular Phone a Myth?

I don't know about you, but growing up, my mother told me nothing is for free. With all these advertisements, specials and deals announcing "FREE CELLULAR PHONES", are they really free?

The answer of course is no. What is meant by a free cellular phone deal is that by purchasing a cellular service plan of one year or more, a cellular provider will give you a phone to use with your plan. In a sense, the advertisements should read "Commit to a year or more of cellular service and we will include the phone for no additional cost." So then, what exactly are your cellular costs, and what can you do to avoid them?

Free Cellular Phones, cellular plan costs and activation fees - huh?

First off, in order to get a free cellular phone, you need to select a plan. The more minutes you buy, the more expensive your plan. Well, I should say the more minutes your buy and WHEN you use them will determine the price of your plan. Most plans include unlimited nights and weekend minutes, It is the daytime or anytime minutes that bite you. The more daytime/anytime minutes you need, the more it will cost. This is really aimed at jacking up the price for business users.

Watch out for the free cellular phone with a rebate deal. For these specials, you must front say $99 dollars, then mail in a rebate form and wait three months to get your $99 back. In a sense the phone is free, but who wants the hassels? Get an instant rebate free cellular phone if you can. Some specials include a free instant rebate phone AND even give you a mail-in rebate on top of your instant rebate. That's a good deal - you make money on the phone.

I will go out on a limb and say that every cell phone plan out there has was is called an activation fee. It's usually $35, depending on the provider. What this covers is assigning a cell phone number, and activating the cellular service to work with your free cellular phone. It's unavoidable, and usually gets charged to your first cellular bill and it's a one time fee.

Taxes, Fees and Surcharges - Oh My!

Here is a summary example a $40 monthly cellular plan - details below:
Plan Cost:	$40.00
Sales Tax:	$ 1.60 (Assumes a state tax rate of 4%)
Federal Tax:	$ 1.10 (Rate varies, usually between 2.5% - 3%)
Regulatory Fees:	$ .60 (Federal Universal Service Fund - varies between 1.5% - 2%)
Surcharges:	$ .75 (Called directory assistance from cell phone
Total Monthly Bill:	$44.05 (This is an example only and not your actual monthly bill)

There are several different kinds of taxes, fees and surcharges that will show up on your monthly bill, but don't fret. Usually, depending on your state and how frequently a surcharge is charged, it does not amount to much. On a $39.95 monthly cellular plan in Connecticut, let's say, the extra monthly charges usually are less then $4 a month. Here is what they are so you know ahead of time, and so you can avoid surcharges if possible.

State sales tax. Nothing you can do to get around it. Basically, on your monthly bill you will pay your state sales tax rate. If there is not a sales tax rate in your state, you don't pay one.

Local or city sales taxes. If you live in a city or county that charges a sales tax, expect the tax to show up on your monthly cellular bill as well.

There is a USA Federal Tax on every bill. The rates vary, but it between 2.5% - 3% your monthly bill. So, if your monthly bill was $40, plan on paying a USA Federal tax between 1.00 - 1.20 cents a month.

What exactly is this section called USA regulatory obligations and fees?!? We will tell you - it's for The Federal Universal Service Fund. It's a tax created by the Federal Communications Commission (FCC) and congress. It states that since telephone services provide a vital link to emergency services, government services, and surrounding communities - a cellular customer must pay for it. It's calculated using a variety of variables that equals what they call a contribution factor, which of course the rate varies. Using the same $40 monthly plan example, the rate is usually between 1.5% - 2% your monthly bill. Plan on paying a Federal Universal Service Fund tax between .60 - .80 cents a month.

On top of these taxes and fees, a cellular user can also encounter surcharges. Some surcharges, such as calling directory assistance, should be avoided, as it can be as much as 75 cents per call. Other surcharges, such as a 911 call, (Yes, they charge additional for that), probably cannot be avoided but will cost you extra.

We are not saying not to search for free cellular phones, just know what you are getting: A plan, a activation fee, taxes and possibly surcharges. I guess it is just like momma used to say, there really isn't anything free in life. Oh well - at least great cellular phone deals still exist!