What Are Cell Phone Plans?

Understand how cell phone plans work to choose the best plan for you

A cell phone plan is a paid agreement with a mobile carrier allowing your cell phone to use their network to make or receive phone calls and text messages, and to use the internet via cellular data.

Understanding Mobile Carriers

In the U.S., there are three major national carriers for mobile phone service: Verizon, T-Mobile, and AT&T. (A fourth, Sprint, was acquired by T-Mobile in 2020.) In the industry, each of these companies is classified as a Mobile Network Operator (MNO). Each MNO must have a radio spectrum license from the Federal Communications Commission (FCC), as well as own and maintain their own network infrastructure to provide the cellular service, which includes the use of transmitters and cell phone towers.

U.S. Cellular is also an MNO. However, it only provides regional rather than national coverage.

What about other carrier services like Cricket, Boost Mobile, and Straight Talk Wireless? All mobile carriers that are not classified as MNOs are resellers. That means they buy network access from the big three carriers and resell that access as mobile service to their customers.

A mobile service reseller is known by the industry as a Mobile Virtual Network Operator (MVNO). These carriers are smaller and frequently offer mobile service at lower rates than the big three carriers. They can charge less because they save money by not having to invest in network infrastructure or licensing.

MVNO carriers primarily offer pre-paid or no-contract services and plans. These plans are typically less expensive despite using the same networks as the big three, but the terms of use are quite different.

Mobile Network Operator (MNO) Pros and Cons

What We Like
  • Most phones can be purchased through a payment plan.

  • Post-paid accounts: Pay for service at the end of the contract period.

  • Better reception than MVNOs during high-traffic periods.

What We Don't Like
  • Steeper credit and payment requirements

  • Data overages can come as a surprise.

Major national carriers offer a few advantages over network resellers. With post-paid accounts, you pay for your service at the end of the service month instead of paying in advance. This usually requires a decent credit score, and may even require automatic payment deductions from a checking account.

With a national carrier plan, you can purchase a cell phone through a monthly payment plan instead of having to pay the total cost up front. While some MVNOs have also started offering monthly installment plans, MNOs tend to have a much larger selection of devices to choose from, as well as more brands and models.

At times when mobile traffic is high on the carrier’s network, MNOs prioritize network access for their own customers over MVNO customers. In well-covered areas, this may not be an issue. In areas with spotty service, customers of MNOs experience fewer dropped calls or other service disruptions.

Customers of MNOs are the first to benefit from advancements in technology made by the carrier. For example, Verizon has invested heavily in the network upgrades needed to support 5G speed and service. When Verizon begins implementing 5G, its customers will be the first to use and benefit from this technology.

Mobile Virtual Network Operator (MVNO) Pros and Cons

What We Like
  • No credit check or automatic payment requirements.

  • Bring Your Own Phone (BYOP) options.

What We Don't Like
  • No payment plan options for new phones.

  • Service is not always as solid as with major carrier plans.

Aside from cheap prices, there are other benefits to choosing a cell phone plan offered by a mobile service reseller or MVNO. First of all, there's usually no credit check required with a network reseller, especially with pre-paid plans.

There are also surprise data overages or extra unexpected fees. When you pay in advance, you avoid the risk of overages or unexpected charges.

Many resellers offer a Bring Your Own Phone (BYOP) option, whereby there is no pressure to buy a new phone from the carrier. As long as your phone was developed to work on the networks that an MVNO uses (GSM for T-Mobile and AT&T networks; CDMA for Verizon), your phone goes where you do.

How to Choose a Cell Phone Plan

Mobile carriers offer plans at several price points depending on the amount of talk time, the number of texts, and the volume of mobile data allowed per month or pay period. To determine which plan is best for you, consider the following:

  • Which of the MNOs provide good signal strength and coverage where you live and work? Don’t just rely on coverage maps. Ask locals, neighbors, and colleagues which services they’ve used and how reliable those services were. You can also do some online digging to determine how well certain carriers work in your area.
  • How much data do you expect to use per month? Most people use between 3 GB and 5 GB each month. Likewise, if you're considering a plan with limits on talk time or the number of texts you can send, take a close look at how many minutes you usually use and how many texts you typically send.
  • Do you already have a phone that you would like to use? If so, which MNO was the phone originally manufactured to work with?
  • How many lines (phones or phone numbers) do you need? Is it just you, or do you need additional lines for family members? Will the cell phone plan be for a senior citizen?

Types of Cell Phone Plans

Here are the main types of cell phone plans that you will come across in your research:

  • Cheap Cell Phone Plan: A majority of plans come with unlimited talk and text. If you aren’t likely to use those services heavily, you can save money by choosing a plan with a set number of minutes and texts. Keep in mind that overages can add up quickly on post-paid plans.
  • Pre-Paid Cell Phone Plan: Pre-paid phone plans are generally offered through MVNOs, though there are a couple of MNOs offering pre-paid options. With a pre-paid plan, you pay in advance for your mobile service and must refill or pay the next month before the end of the current 30-day period.
  • Family Mobile Phone Plan: Family phone plans are no longer limited to MNOs, though they may be the most affordable option, depending on how many lines you need. There are two general ways family plans are set up: shared data or per-line fixed data. With shared data family plans, there is one allotment of mobile data that is shared by all lines on the plan. The parental controls on some shared data family plans allow you to set data limits on each line. Family plans with per-line fixed data often distribute the total amount of data equally between all lines automatically. For example, a family plan with fixed-data and a total of 10 GB across four lines would automatically allot 2.5 GB to each line.
  • Senior Cell Phone Plan: Choosing the best senior phone plan can differ based on whether any add-on services are needed. Verizon and AT&T offer senior plans with discounts for people aged 65 and up. T-Mobile’s senior discount plan is available to people aged 55 and up. The senior plans with MNOs are simply discounted plans and generally don’t offer any special services. If the older adult in your life needs access to medical assistance or the ability to call for emergency help with the push of a button, here are two carriers to check out: Great Call (uses Verizon’s network) and Seniors Wireless (uses T-Mobile's network).
  • Unlimited Data Phone Plan: Unlimited data phone plans are growing in popularity and all MNOs have some kind of unlimited data option, as do many MVNOs. Before jumping into an unlimited data plan, there are a few things to know from the fine print. Unlimited data plans throttle or intentionally slow down your data speed for data-hogging apps, such as video or audio/music streaming. Unlimited plans also throttle your data once you’ve used a certain threshold amount of data. For example, an unlimited plan may throttle your data after you’ve used 35 GB and slow your data speed from 4G down to 2G until the next billing cycle.
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