Cellphone overage charges

Pre-paid and post-paid plans

The billing plans for mobile phones can be categorized as either a pre-paid plan or a post-paid plan.

In a pre-paid plan, the cellphone user pays for the minutes before using them. This kind of plan is popular in many Asian, South American, and some European countries.

Post-paid plans and Overage charges

In post-paid plans, the cellphone user pays at the end of the month for the minutes used during that month. Post-paid plans are common in North America and are catching up in other countries. The cellphone providers (that is, the wireless carriers) typically charge a monthly fee for the post-paid plans. In lieu of the monthly fees, the cellphone users get a monthly quota of free minutes. When a user goes over the minutes allowed under the particular pre-paid cellphone plan, he is charged separately for the extra minutes. This fee for the extra minutes is called overage fees or overage charges.

For example, lets say that a mobile phone user signs up for a post-paid cellphone plan that costs $40 per month and is allowed a quota of 700 minutes under that plan. If this user ends up using 750 minutes in a month then he will be charged an overage fees for the extra 50 minutes.

Overage charges in North American countries

North American post-paid cellphone plans typically divide the minutes used in various categories such as peak minutes (minutes used during peak hours - usually from 6:00 AM to 9:00 PM but varies from one cellphone provider to the next), evening and night minutes (also called off-peak minutes - refer to minutes used during non-peak hours), weekend minutes (minutes used on Saturdays and Sundays), mobile-to-mobile minutes (minutes used for calling another cellphone on the same wireless provider's network), and so on. The peak minutes also go by the name of anytime minutes or whenever minutes.

The peak minutes allowed under most post-paid plans are usually limited (such as 750 peak minutes allowed in a month for $40 per month) and minutes in all other categories are either free, or come with a large monthly quota (such as 5000 weekend and weeknight minutes). Therefore, in North American countries, the overage charges typically mean "peak overage charges", that is, a cellphone user gets charged separately for the extra peak minutes used in a month.

Cellphone providers usually charge a very steep overage rate. In the USA, the cellphone provider's overage charges typically range from 40 cents per minute to 50 cents per minute. This penalty for going over the allowed minutes can add up quickly unless cellphone users watch their peak minutes usage closely.

This rate of overage charges is so high that according to MinuteWatch, an average american family could send a child to college for two years by eliminating cellphone overage charges.

Keeping track of peak minutes

It is estimated that a very large number of cellphone users go over their peak minutes every month. Exact figures are hard to come by but according to CellKnight, about 15 million cellphone users exceed their monthly quota of allowed peak minutes every month.

Wireless carriers provide some facilities to cellphone users for keeping track of their peak minutes. For example, dialing a special number such as #MIN sends a text message on the cellphone with details of peak minutes used so far in that month. One can also log into their online account at the wireless carrier's website to see their peak minutes usage. These facilities, though a little inconvenient to use, are great tools for a cellphone user who does not want to accidentally go over the allowed minutes and pay a huge overage bill.

The biggest drawback of these tools is that one has to remember to frequently check how many peak minutes has been used so far in that month. Most users tend to forget to use #MIN or to log into their wireless carrier's online account even once a day. This limitation has given rise to an entire industry for monitoring cellphone minutes usage. Online services such as CellKnight.com and MinuteWatch pro-actively monitor the minutes usage multiple times every day, and thereby, take the pain out of having to remember and check the peak minutes used every now and then. These services enable users to set limits on their minutes usage and when the users cross those limits, they are notified by email and text-message alerts. For example, a cellphone user who is allowed 750 minutes every month can request CellKnight.com to send a red alert when the peak minutes used crosses 700 minutes.

Future of overage charges

Almost all wireless carriers in the USA have introduced unlimited post-paid plans that does not place any limits on how many peak minutes a cellphone user can use in a month. However, these plans are still very expensive (about $99 per month) for most cellphone users. Unless the unlimited plans become affordable enough to most people, the overage charges are here to stay. Until such time, cellphone users can continue to user #MIN or better still, use one of the minutes tracking/alerting services mentioned above.