Updated: Nov 20, 2021
We've all heard the saying: If something sounds too good to be true, it probably is. How many telephone calls, text messages, and emails have you received indicating that you "won" a trip or a large sum of money? Too many to count I presume.
However, when it comes to cell phone providers, we get excited when we hear an offer on the latest model such as "buy one get one free" or "get up to $500 off." Are they offering a good deal?
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How Cell Phone Providers Make Money
Most of us have had dealings with a major cell phone provider—such as Verizon, AT&T, or T-Mobile—at some point in our life. They make their money providing wireless communication services and selling wireless devices—such as smartphones and tablets. They offer prepaid & postpaid plans. On a prepaid plan, you pay for the service upfront whereas, with a postpaid plan, the service is paid at the end of the month.
Some of the major cell phone providers make the majority of their money from postpaid plans. For example, according to Forbes, T-Mobile's postpaid services made up about 65% of the total revenues in 2019. That is not surprising—the major cell phone providers spend a lot of time, money, and effort to market postpaid plans.
Some cell phone providers are in the prepaid plan market—such as Mint Mobile. Mint Mobile is a mobile virtual network operator that "leases" space from T-Mobile, utilizing T-Mobile's cell phone towers to provide service to its customers.
Prepaid Plans vs Postpaid Plans
There are pros and cons to each plan. With postpaid plans, you typically get regular smartphone upgrades, travel perks, free entertainment, and more bells and whistles. But, you generally end up paying substantially more and have less flexibility in choosing a data plan compared to a prepaid plan.
With prepaid plans, not only do you generally have more customization & flexibility, but you often pay less for the services than a traditional postpaid plan. In addition, miles & points enthusiasts understand you have the option to engage in reward stacking—accumulating miles & points from multiple sources associated with the cell phone provider and smartphone purchase(s). If you don't know what reward stacking is, learn more in the following post: How to Win Points—With Your Spouse and Your Credit Card!
Who comes out on top? It depends on you. Some consumers will want to have the latest smartphone model whereas others see the value of saving money and reward stacking. I have saved hundreds of dollars this year and increased my credit card rewards by making the switch from postpaid to prepaid services—and I love it! I wanted to provide the value of the "other side."
How Your Cell Phone Provider Is Taking Your Miles & Points
It is now common practice for cell phone providers who offer postpaid plans to lease their customers a smartphone. Although the customer generally has the option to buy the smartphone at the end of the lease, the customer will usually return the smartphone in exchange for a newer model. What does the cell phone provider do with the "old" smartphone? They sell it.
From personal experience, I have found that the newer smartphone models are built to last. I have had my Samsung Galaxy S8+ for close to 4 years now—and it still works great—even though I have dropped it several times! (Don't underestimate the value of a sturdy carrying case!) It is no surprise that the big cell phone providers push the lease option to their customers—there is a big resale market.
Therefore, cell phone providers earn revenue from the smartphone according to the customer's lease agreement and when it is sold after the customer turns it in. This process prevents you from earning miles & points from reward stacking.
With a prepaid plan, you have the option to bring your phone. This gives you the option to buy your smartphone outright—and use your credit card for the transaction. By using the right credit card, you will earn rewards. In addition, you can take advantage of online shopping portals, special offers exclusive to cardmembers, and other creative ways to stack your rewards.
"Strategically selecting the right cell phone provider could result in saving hundreds of dollars every year."
Granted, smartphones are expensive, and they can easily cost in the range of $1,000. Using your credit card to purchase a smartphone is not a good idea if you are unable to pay your bill in full when it becomes due. The interest from your credit card would eat away the miles or points earned from the transaction. An exception would be using a credit card that offers a 0% APR for an extended period, such as the Chase Freedom Flex℠—it currently offers 0% APR for an intro period of 15 months along with a 20,000 Ultimate Rewards® welcome bonus! You can apply for this card here!
An Example of How to Stack Rewards
Let's now look at an example of how you can stack your rewards by purchasing a new Samsung Galaxy S21 5G. It currently costs ~ $850 with no trade-in.
First, start with a great credit card. The Chase Freedom Flex℠ is a good place to start for those who are new to reward stacking. It currently has a 20,000 Ultimate Rewards® welcome points bonus and no annual fee! You may only earn 1X from the purchase—unless you make your purchase in a bonus quarterly category that you activate. In that instance, you will earn 5X!
It includes Cell Phone Protection—up to $800 per claim and $1,000 per year in cell phone protection against covered theft or damage for phones. Unfortunately, the Cell Phone Protection does not cover prepaid plans. In order for there to be coverage, the monthly postpaid provider's bill must be paid with the Chase Freedom Flex℠.
There is a 0% APR welcome offer for 15 months! Learn more about this card in the following post: Chase Freedom Flex—A Remarkable No Annual Fee Card!
How much are 20,000 Ultimate Rewards points worth? On a strict cashback basis—$200. However, when paired with the Chase Sapphire Preferred® Card, there is a 25% boost when the points are redeemed on Chase's Travel Portal. However, when strategically using transfer partners, it is possible to get a value of ~1.5 to 2 cents per point—or $300 to $400 in value! Keep in mind that you do need a qualifying card—such as the Chase Sapphire Preferred® Card—to access Chase's 14 transfer partners. You can apply for this card here! Learn more about this amazing card in the following post: Chase Sapphire Preferred—The Best Credit Card Just Got Better!
Would you like to find out the value of other credit cards? Feel free to use our Credit Card Selector Calculator. It was designed with you in mind! It uses our proprietary algorithm to determine the best credit card in our database based on your spending habits.
Next, use an online shopping portal, such as Rakuten. Right now, Rakuten is offering 10% cashback at Samsung. Use this link to get $30 when you set up your account!
I have modified my Rakuten account so that I earn American Express Membership Rewards® as opposed to cashback. Membership Rewards® are valued by some points enthusiasts at ~1.5 cents per point; as a result, I have more value earning Membership Rewards® than cashback—which is 1 cent per point.
After you click Samsung's "Shop Now" button through Rakuten, make sure you also create an online account so that you can earn Samsung rewards. You would earn 1% Samsung rewards from this purchase.
Next, proceed to use your Chase Freedom Flex℠ to complete the purchase. You may be offered a 5% promo code from Samsung. If you use this promo code, it may invalidate the 10% rewards from Rakuten. 10% is a better deal than 5%; therefore, you may decide not to take a chance and use the promo code. But, if you can locate a promo code of at least 15% off, it may be worthwhile to use it. You may even use the online "Chat with an expert" and kindly request a promo code of at least 15% off. It doesn't hurt to ask.
Now, let's add up the points! You will receive 914 Ultimate Rewards® points by using the Chase Freedom Flex℠ ($849.99 + tax), 8,500 Membership Rewards® points (if you modified your Rakuten account), and the 20,000 welcome bonus if you are a new cardmember and have not received a welcome bonus for this credit card within the last 24 months. That is a total of 20,914 Ultimate Rewards® points. When adding the value of the Membership Rewards® points ($127.50), the total value is ~$336.64! This takes the actual price of the smartphone from $913.74 to $577.10!
Although you will earn Samsung rewards from the purchase, they do expire after 1 year.
Saving Even More Money With Mint Mobile
The reward stacking does not stop there. Using a prepaid cell phone provider—such as Mint Mobile—can create a substantial amount of additional savings. You can set up your account here! I'll use an example involving Sprint—which has merged with T-Mobile—and Mint Mobile.
The last contract I signed with Sprint was from 2017. My wife and I purchased 2 Samsung Galaxy S8+ smartphones along with wireless service. The cost to purchase each smartphone after the $300 discount was $550, or a total of $1,100 for both. For 24 months, the average monthly amount was ~ $23 per smartphone or a total of $46 for both.
The actual price for wireless service that we paid was ~$85 per month. This was a discounted amount; it would have been proportionately greater if only 1 of us was on the postpaid plan. And, it was less than what we would have paid Verizon or AT&T.
In 2021, we decided to switch to Mint Mobile. Because we owned our phones outright, we took steps to unlock our phones and transfer our existing mobile numbers to Mint Mobile. After, examining prior statements from Sprint, we determined that we did not need an unlimited data plan and proceeded to select the 8GB (now 10GB) per month plan. A big reason for this is we have our Wi-Fi set up at home that our smartphones automatically connect to as opposed to using its mobile data network. Hindsight being 20/20, the 4GB plan would have adequately met our needs.