4 ways to cut your phone bill

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

People everywhere are scrambling to trim the soaring costs of food and fuel to keep their budgets from bursting.

However, you may find a few extra nickels and dimes in an unexpected place — by cutting back on your phone bill.

“Telephone charges, and especially long-distance charges, are a discretionary expenditure. They can be reduced to make room to save for other financial goals like retirement,” says William Jordan, president of The Sentinel Group, a financial planning and wealth management firm in Laguna Hills , Calif.

Here are four ways to reduce your phone bill and pocket the difference.

Put costs on hold
Trimming your phone bill can help you save precious nickels and dimes in a slowing economy.
4 ways to trim phone costs
  1. Use toll-free services/calling cards for long-distance
  2. Switch to prepaid cell phones
  3. Eliminate pricey “extras”
  4. Try Internet phone services

Use toll-free services and calling cards for long-distance calls

A huge portion of the phone bill is usually made up of long-distance charges. Many traditional phone companies charge between 5 cents and 10 cents per minute, plus a monthly fee of around $5 or $10.

Calling cards and their corresponding toll-free number plans offer some of the best long-distance rates around, with charges of about 3 cents to 4 cents per minute.

Calling card companies offer users cards with a special account numbers and personal identification numbers to dial before making long distance calls.

“My husband and I did away with traditional long-distance years ago because we had calling cards,” says Marcia Brixey, author of “The Money Therapist: A Woman’s Guide to Creating a Healthy Financial Life.”

“Every six months, we add on about $30 worth of minutes. When we recharge our card, it’s always at the same rate.”

If you commit to making all of your long-distance calls with calling cards, you may be able to switch to a more basic telephone package from your home phone provider, which could save you up to half of your monthly costs.

While calling cards can save money, buyers should be aware of hidden fees. Some plans require minimum usage times, monthly charges or both. Once you use up all your minutes, some calling card plans may also charge a higher rate to replenish the long-distance minutes.

New users will also need to get used to the idea of dialing their account numbers and PINs each time they make a long-distance call.

“It’s cumbersome to dial a lot of numbers, but I tell myself that it’s a whole lot cheaper than dialing a land line,” Brixey says.

Another potential problem for users is the risk of running out of minutes while on a call. Before placing a call with a calling card, an automated prompt will tell you how many minutes you have left to use.

“You don’t want to be in the middle of a business conversation and then have the phone go dead,” says Brixey.

Instead of calling cards, consumers can also use toll-free services for long-distance. Users dial a toll-free number for service access before making their long-distance calls (which incur charges).

Many toll-free services are offered by traditional phone companies, and consumers can use enhanced features, such as the ability to access directory assistance, make collect calls and purchase calling cards for later use.

Other toll-free offerings are linked to “dial around” or “10-10” plans (an online search will yield several providers). With these services, callers bypass their traditional phone company’s long-distance services to make the calls.

Toll-free services, while inexpensive, are not necessarily cheaper than calling cards. Some might advertise teaser rates, but check the fine print. The low rates may not kick in until several minutes into the call. Make sure you’re familiar with terms and conditions before using these services.

Use a prepaid cell phone instead of a monthly plan

Another way to save money on your phone bill is to use a prepaid cell phone to reduce your expenses. Prepaid wireless carriers, such as Net10 and TracFone, can offer no-contract options and predictable monthly phone bills.

They can also offer decent long-distance rates — although not as low as the rates offered by calling cards and toll-free services.

“If you have a cell phone and you use it for long distance, there’s really no need to have traditional long-distance at your house,” Brixey says.

Traditional cell phone plans can charge you big bucks if you go over the monthly allotment of minutes. Prepaid phones, however, don’t let you fall into that trap. You can only use up to the amount for which you’ve already paid.

Rates on prepaid plans range from about 10 cents to 20 cents per minute, and many providers offer promotional rates.

Although the rates for prepaid cell phones can be cheaper than traditional phone charges, you do have to consider the possibility of the cell phone dropping phone calls and having bad sound reception.

You should also be aware of what you’re paying for. It may seem simple to pay a lump sum for a set number of minutes, but many prepaid plans subtract daily usage fees and even roaming charges from your balance. You may find that if you make more calls during the day, you use up your prepaid time faster than if you talk mostly at nights or on weekends.

Also, if you don’t use the minutes you buy for your prepaid phone within a set time frame, you might lose them. You could also lose the right to your cell phone number if you don’t renew the service when it expires, which could be as often as monthly. Be sure to read the terms and conditions of any offer before agreeing to the service.

Eliminate pricey extras, such as caller ID and call waiting

If you have a traditional phone line, do you really need pricey options such as caller ID, call waiting and call forwarding?

“Don’t forget that making fewer calls and using fewer services is probably the quickest and easiest way to reduce your phone bill,” Jordan says.

Although your phone company may make these services available on a per-use basis, the charge typically will be much higher per use than if you carried these charges as part of your monthly plan.

Also, you could be charged a penalty to adjust your plan if you’re already locked into a contract. If that’s the case, make an appeal to change the features without penalty.

“It’s worth a try to get a rate reduced,” Jordan says. “You just have to use patience and perseverance. When someone in customer service says they can’t help you, my favorite phrase is, ‘That is unacceptable. Who do I need to talk to who can help me?'”

Not all basic plans or minimum-service plans (where you only use phone service for a set number of hours) are available in all regions. In many cases, you have to choose a bundled plan, even if it offers fewer features than a typical telephone package.

Try Internet phone services

You can tap the power of the Internet to reduce your phone bills. Companies like Vonage, Skype and magicJack use voice over Internet protocol, or VoIP, technology to offer potentially cheaper phone services.

With VoIP, telephone calls are converted into data, sent over the Internet and converted back into sound for the recipient on the other end of the call.

“(VoIP) is the next generation of telephone service,” says Andy Abramson, editor of the VoIPWatch blog. “It provides users with a lot more than what a regular telephone company offers, including all the extra features, for a lower price.”

Features like call waiting, caller ID, voicemail and call forwarding are typically included in these plans. Many plans also let users retrieve voice mails via e-mail.

In addition, VoIP services may allow home and cell phones to ring simultaneously, so the user can answer the call no matter where he or she is.

The cost for VoIP services vary widely. Many providers charge around $20 a month, but some services can be less than $50 a year or even free (when you call people who use the same service). Many of these services allow unlimited long-distance calls within the United States and Canada as part of their basic fee.

International calling rates can be cheap, too.

“I had an hour-long conversation with a friend in South Africa,” says Jim Taylor, a VoIP customer in Birmingham, Ala. “When I hung up the phone, I went online to my service provider, logged in and saw what it cost. The charge was under $6.”

One disadvantage of VoIP phone services is that users need more than just a telephone and landline to make a phone call.

For starters, users must have high-speed Internet access and may have to download some computer software. Vonage also requires the use of a special phone adapter and Skype requires a computer headset. MagicJack is a product in and of itself that connects a phone cord and a computer’s USB port.

VoIP users have reported problems with the quality of phone calls made over the Internet, and consumers have reported varying levels of success when contacting their provider’s technical support teams.

Another concern with alternative telephone services is if your Internet goes out, your phone service goes out, too. Ditto if your electricity is interrupted.

“If the power goes out, it could be a problem,” Taylor says.

He recommends buying a battery backup package, which can keep a computer running for about one to two hours after electricity stops. These generally cost about $100 at an electronics store.

The ability to make 911 calls over Internet telephone services is another concern. In many cases, when users set up the service, they’re required to provide a physical address for emergency response units, and that address stays in the user’s profile.

However, if the user moves any equipment to a different location without updating his or her profile, problems can occur.

“You don’t want to call 911 and have the police show up at your old location,” says Taylor.

Before signing up for any Internet telephone service, be sure to read some of the company’s online reviews first.