Fees RevealedThe subject of fees is a pretty generic topic to discuss. The objective of this section is to take you through two basic elements. First, those charges that you, the customer will encounter in the prepaid wireless payment world. These will be the most near and dear to your heart! Second, those that wireless carriers, technology providers, and distributors/retailers either pay or receive in the course of taking your payments. This second part greatly affects the charges you ultimately see, and it also provides a deeper knowledge of the marketplace that you'll either find interesting, enlightening, or not care about at all ;-). The organization of these topics should allow you to explore only those areas that are of interest to you. Please note that this discussion includes charges related to making payments in general, and does not cover specific service or feature related charges. For example, a daily $0.50 charge for wireless web, does not fall into this particular discussion. So, when reading this section, consider that regardless of what prepaid wireless plan you're on, you want to put $50 on your prepaid account balance. Customer Facing These fall into two general categories, and while they can differ from carrier to carrier, this is a good rule of thumb: 1. Pay-as-you-go (PAYG), Daily, and Monthly Plans
2. Unlimited Plans
So why the difference? And if there's no fee, how do stores make money? This is an interesting topic, and has changed over the past couple of years as unlimited plans have rollout out. Basically, the classic "no charge" approach is based on a margin model. A good example of this is general consumer products, like Apple for example. Apple will sell sell a $100 iPOD to a store for $75, and the store will sell it to you for $100 (note that the actual costs here are completely made up; I have no idea how much Apple sells its iPODs for to stores!). In this example, the margin is 25% ($25/$100 times 100%). The same idea holds true for a $50 card, where the wireless carrier will sell it to the distributor at a discount (i.e. a margin), and the distributor will then sell it to a dealer. The dealer may then sell it to a smaller store, who will then sell it to you. Many people wonder how much these margins are. So how much does a distributor actually pay for a $50 card. Well, it depends on what the wireless carrier negotiates with the distributor. And how much the dealer buys it from the distributor for depends on what they negotiate, and so on. All I can really say is that margins tend to range from 1% to 25% or more depending on the deal, and at what level you're talking about. But it's fair to say that the wireless replenishment business is much tighter than other industries where margins can range from 50% to 500% and more! For unlimited type plans where you're charged a convenience/service charge, typically the margin paid to stores is much lower and often zero. What this means is that the $1 or $5 fee that you pay gets shared between the store, the dealer, the distributor, and sometimes even the wireless carrier! It's definitely a volume type business. In other words, people don't make money selling the occassional payment product like they would if they were selling designer purses. They really count on you, the customer, coming back over and over again, and they count on lots of customers. So, it's fair to say that the larger the wireless carrier, the lower margins and payment charges they can support because they can offer stores the promise of much higher volumes. So why the difference with unlimited plans? Well, it basically comes down to the fact that these plans are so rich, and cost the wireless providers so much to support, that paying backend margins to distributors is just too expensive. The fee model allows distributors, dealers, and stores to get paid from the convenience/service fee that you pay. So what does this mean for you? Well, all it really means is that when considering the cost of a particular prepaid plan/offer, keep in mind whether there are payment fees, because an extra $5 a month can certainly make a big difference. And let's not forget.... The last fee type that I haven't mentioned yet is the technology processing fee. Think about real time payments as an example. You walk into a store that has this capability and give the clerk your phone number. They input your number into a terminal or website, enter in the amount you want to add to your account, and the money magically appears on your phone. Well, the magic isn't really magic afterall ;-). There is a technology provider/vendor that's connecting the store to your wireless company in order to add the money in real time. This technoloogy vendor receives a transaction fee (and sometimes a cut of the margin or both!) for each use of their "pipe." Although this is example makes it sound easy, the technology partners actually offer a significantly valuable service. Afterall, they have to maintain 24x7 servers, monitor traffic, deal with problems or outages, not to mention maintain relationships with the wireless carriers and retailers. Believe you me, it's no small task. One last thing...to avoid fees! No not stealing ;-). There's actually a legitimate way to avoid paying replenishment fees. Most wireless providers offer direct replenishment programs (i.e. credit cards, debit cards, electronic checks), and the typically don't charge fees. So while you'll pay $3 (for example) for a $50 payment in a store, if you use your credit card, there won't be a fee. Note that this doesn't mean that you use your credit card in the store. This is when you go directly to your wireless provider by calling them or going to their website. The only exception here is that you may be charged a service fee for making a payment from your checking account (i.e. electronic check). Definitely an option worth checking out if you have a plan that typically charges fees when you go to your local store.
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