Postpaid vs. Prepaid Fees

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Postpaid vs. Prepaid Fees

by Don
(Lexington, KY)

I'm thinking of switching to prepaid from postpaid, but I'm unclear on taxes and fees. My family plan right now nominally costs $70 per month, but taxes and fees adds another $14. With prepaid, are there other hidden taxes and fees that would make the actual cost higher than the nominal cost? From what I've read, there should just be sales tax, but is there anything else like 911 fees and universal access fees, etc? So if I go with PAYG at $.10/minute and use 300 minutes, I buy a $30 card and that's it? Or if I go with a plan like Virgin's Beyond Talk for $25 a month, is it really just $25 a month? I can live with sales tax (say 6%), it's the nickel and diming that happens with postpaid that irks me and is why I'm considering switching.

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Postpaid vs. Prepaid Fees

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Aug 05, 2010

Prepaid Wireless and Fees - Part 1
by: PrepaidWirelessGuy

This is a great question, and really gets to the heart of the cost structure of prepaid wireless, and the competitive forces that are now in play! Historically there were always additional fees charged on top of the plan amount. These types of fees include telecom taxes, regulatory fees, and e911 fees. In many cases per minute or per day type plans had these fees charged to the prepaid account balance each month, though that was not always the case.

For monthly/unlimited type plans these fees were classically ALWAYS charged on top of the monthly plan amount. So, as you note, a $50 plan wasn’t really $50 after these fees were added. In 2009 Boost re-launched its Unlimited by Boost plan as Monthly Unlimited, which now INCLUDES all fees. In early 2010 MetroPCS also moved to this model, and in August 2010 (this week!) Cricket moved to this all inclusive model as well. I believe that Virgin Mobile operates the same as Boost with respect to these fees.

NOTE, however, that there are a handful of states that require e911 fees to be charged at the point of sale. Some are charged as a percent of the total purchase amount, while some are charged as a fixed amount per transaction. The fee currently ranges from 2% to $0.25-$0.38 per transaction. I can get into more detail here, but I’m not sure that would be valuable. If you’re in a state that mandates these fees (i.e. it’s not at the prepaid carriers’ discretion), the only away around this would be to buy your replenishment in a state that doesn’t have these fees, though I don’t expect that would be practical.

Aug 05, 2010

Prepaid Wireless and Fees - Part 2
by: PrepaidWirelessGuy

You are correct regarding your statement about sales tax still applying, so any campaign that notes $50 = $50 or $45 = $45 will ALWAYS have a legal disclosure noting that applicable local sales tax still applies. Again, not something that the prepaid providers have any control over. In fact, when Boost first launched its “all inclusive” plan, they used this marketing campaign but later pulled it because it’s misleading. Legally accurate, but misleading if you want a no BS campaign that doesn’t have fine print! Cricket launched their all inclusive approach in the same way (with the fine print), which in my opinion is problematic. But that’s what this site/forum is here for – to untangle the confusion!

So, all in all, for Boost, Virgin Mobile, MetroPC, and Cricket, they will charge you only the face value of the plan (ex. $50, $45, etc.) each month. When you go to the store (or use a credit/debit card) you will be charged sales tax on the amount of the reload. And of course, the e911 fee as described as the exception depending on your state. Also note that some states don’t currently charge sales tax on wireless services. So, for example, if you buy a $50 topup in California, you won’t pay any sales tax, so $50 truly means $50, however, if you buy the same topup in New York you’ll pay sales tax in the store on that $50.

One last point to note is that some prepaid providers charge reload fees while others do not. For example, Boost does not, while Cricket still currently does. So when you’re looking at your “total cost of ownership,” you’ll want to look at which carriers are including telecom and regulatory taxes and which aren’t, as well as which are charging reload fees and which aren’t. I expect that most prepaid offerings will eventually be all inclusive (with no reload fees either), for customers are very savvy and are no longer tolerant of paying these fees. Particularly now that carriers are advertising this aspect more and more, customers will prefer those plans that offer the same services with lower (or no) fees.

The bottom line is that while some prepaid plans will feel a lot like postpaid in terms of these fees, you can avoid these extra costs with some prepaid providers, and more and more will follow suit. To the contrary, with postpaid plans, you currently cannot avoid these extra fees.

I hope this helps!

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