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Save cell phone dollars with a family plan

You could be wasting unused minutes every month.  "Today" contributor Jean Chatzky has advice that could save you some money.
/ Source: TODAY

Using mobile phones has become a way of life for many American families, which means another expense added to the monthly budget. Studies show that some families are wasting money on unused minutes, but an alternative is sharing the minutes on one family plan. Contributor Jean Chatzky, Money magazine’s editor-at-large, was invited on the “Today” show to talk about picking the best phone plan for your family needs.

Share and share alike? That's the current trend in the cell phone industry. According to the Yankee Group, 35 percent to 40 percent of all cell phone users are now on some form of family plan.

What are family plans?
Essentially they're plans that have two or more lines (each with its own phone and its own number) that share minutes and are billed on a single bill. There is usually a base monthly fee that varies based on the number of minutes you select, and additional lines can be added at a reduced charge.

Are they economical?
According to JD Power, only 61 percent of total wireless minutes get used each month. If you and a family member each buy 600 Anytime Minutes from Cingular, it'll cost you $49.99 each or roughly $100. But if you double up, you can buy 1250 Anytime Minutes for $79.99 combined — you get 50 more minutes and you save $20. Most of the big companies — Verizon, AT&T, T-Mobile and Nextel — offer these types of plans.

The reason behind the family plan
Wireless carriers are trying to build loyalty. Things like number portability have made it easier for consumers to switch wireless companies on a whim. It's expensive for wireless companies to recruit new customers, so your company wants to keep your business. Most of these plans also allow you to talk to other people in your family for free, which allows you to reduce the number of minutes you buy and — wireless carriers hope — will entice you to stay with your plan instead of switching to a competitor.

Is sharing minutes a good idea?That depends on how responsible the members of your family are. If everyone plays ball and stays within their predictable minutes, then yes, it can be a good idea. But the moment a chatterbox starts treating Anytime Minutes like water, they'll talk you into bankruptcy. Even on family plans, going over on your minutes can cost you 40 cents for each additional minute. An extra two hours of talking each month can cost nearly $50!

Ballpark minutes for your familyIf each person has had an individual phone in the past, you can just take the minutes they've been using and add them up. If you're giving a phone to a teenager, talk to them about how they plan on using (or you plan on allowing them to use) the phone. Then teach them how to use the feature on the phone that lets you track the usage. The Web site myrateplan.com can help you figure out how many minutes you're likely to use and then subtract the mobile-to-mobile pieces as well as nights and weekends, to help you buy the right plan.

What's the best plan to get?
It always makes sense to buy slightly more minutes than you think you'll need. If you go over, as I noted earlier, it's easy to find yourself with a bill that's double the size you anticipated.

Can I change my current plan to a family plan?Yes, but it'll be easier to do if you stick with the same carrier. They're usually willing to do this (just as they're willing to reduce the number of minutes you're buying each month or make other adjustments to your plan) if you're willing to extend the length of your contract.

Other things you should think about buying with the planYou should make sure you know whether any members of your family will be using the wireless data services most carriers now offer. According to the Yankee group, about one-quarter of all subscribers now use data services once a month — that includes text messaging, downloading ring tones, downloading games and using the wireless Web.  It always makes sense — as with minutes — to buy what you need upfront, rather than paying more on the back end.

When you don’t want to share your minutes
You may want to go the opposite route entirely and go with a prepaid phone, though the minutes on a prepaid plan are more expensive. The best deals out there are from Virgin, where the pricing is 25 cents for the first 10 minutes you talk each day and 10 cents per minute thereafter. Verizon's plan starts at 10 cents per minute but charges 25 cents to connect, not a good option for someone making a lot of short calls. And Cingular has a plan that offers cheaper weekend use. Again, you can compare all the pre-paid plans at myrateplan.com.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2004. For more information, go to her Web site, .