Over the weekend I noticed an ad in our local newspaper for WalMart's new prepaid iPhone plans. The headline announced in 4-inch high letters and retina-searing colors that you could get a new iPhone 5 and pay just "$45/Month*" for the service. As anyone with the consumer savvy of a third-grader knows, in an ad like this the most interesting part inevitably comes after the asterisk.
Big deal? Maybe. It depends on how you feel about sneaky price increases.
Because the fact is that an average month is not 30 days. There are 12 months in a 365-day year, but only 360 days in 12 30-day periods. That five-day difference is the equivalent to about a 1.4% price increase, because in any given year about one in six customers actually pays for 13 "months" during the 12 month period.
So on average, the "$45/month" plan actually costs about $45.62 per calendar month. Most customers will pay twelve times $45, or $540 in any given year. But some will pay $585.
Interesting, yes, and kind of an obnoxious anti-consumer move. But it made me curious, since I'm on a T-Mobile prepaid plan and T-Mobile charges for celendar months as most people would expect. My plan renews on the same day each month.
With a little research I found that T-Mobile, Virgin Mobile, and Boost Mobile all charge for calendar months. AT&T, Verizon, and WalMart's StraightTalk are all based on 30-day "months" and therefore have the hidden 1.4% price increase. On their websites, Verizon and StraightTalk describe their plans as "30-day" plans and not "monthly," so at least they technically disclose the plan even if most consumers don't do the math to figure out the implications.
The special raspberry award goes to AT&T, which describes its prepaid plans as "monthly." I had to delve into the legalese to find a clear indication that AT&T's "month" is not the same as yours and mine.
Why do they do this? Undoubtably, AT&T, Verizon, and WalMart have some PR-friendly explanation about how short-changing customers by 1.4% is somehow in the customer's interest. I think it's much more likely that they thought they could get away with it. For a $50/month prepaid plan, this amounts to about $8/year per subscriber on average. Multiply by millions of prepaid subscribers and it starts to look like real money.
Maybe this isn't the most egregious way mobile phone companies sneak extra charges onto your bill. But it is one of the more subtle. So shame on them. And buyer beware.