What’s The Catch?: Do You Want Free Data?

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Dec 10, 2014
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Behavioral Finance, Question of the Day, Budgeting, Current Events

Just got this text from my wireless carrier:

We appreciate your loyalty.  You are currently on the $50/2GB plan.  You can now get an extra 2GB of data per month for the same price you pay now.  There’s no change to your voice plan or contract extension.  Would you like to move to this new plan.  If so, reply YES.

Would you do?

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Some potential answers from students might include:

  • Call the carrier to understand what you are agreeing to.
  • Be wary since this may lead to higher costs once your contact expires.  It may be free now but if you don’t change it back to 2GB later, they will charge you for it.  Why you should check your bill every month.
  • Check your contract end period and be sure to switch back to 2GB a month before your contract expires if you have maintained usage below 2GB every month.  This usage information is available on their website.

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Ask students why a company might offer you free data usage.

Potential answers:

  • Will encourage you to use more data and once your contract is up, you will stay at the higher data usage level and have to pay for it.
  • Encourage brand loyalty.  Wireless business is very profitable.  Once you have built out your network, each customer you add has low marginal cost.  They want to maintain high customer retention levels.
  • Maybe they cut the prices on their plans and don’t want me to negotiate a lower rate and so are offering me more to keep me at higher price point (hat tip to Andrew Furth for this one!)

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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