Posted by Lending Club :: April 16, 2009 @ 6:04 am

You would expect the widespread availability of cell phones and variety of providers competing for our business to drive down the cost of service. That’s why I was so surprised to learn that the average cell phone customer ends up paying more than $3 per minute of talk time.

Those results come from a report by the Utility Consumers’ Action Network and were covered in the LA Times. The per-minute cost tends to be so high because most people use less than their full allocation of included minutes. The average cost is raised by some people paying much higher per-minute amounts, but the majority of us still pay between 50 cents and one dollar per minute. The report also found that the average customer uses only about a third of anytime minutes allowed by most wireless plans.

One of the reasons we don’t even think to calculate our per-minute costs is that cell phones seem so inexpensive compared to the traditional alternatives. Paying $50 (or more) a month doesn’t seem like a big deal when local telephone service used to cost that much and long distance calling added even more to the bill. Replacing a traditional phone with a cell phone might save you money, but that says more about how expensive your old phone was than how inexpensive your new one is. Also, with the incredibly low prices of home phone service from Skype and Vonage, the old comparisons are no longer valid.

If you tend to use less than your full allotment of anytime minutes, consider downgrading your plan. Paying less on a regular basis will probably cost less overall, even if you have an occasional month where you exceed your limit and have to pay more. If you’re like me and already have the smallest calling plan but still use only a fraction of your minutes, then a prepaid phone may be a less expensive alternative. I’ve noticed that the smallest plans have, in recent years, been creeping upwards both in terms of minutes allowed and cost. That’s fine for people who use most of their minutes, but it means that the per-minute cost continues to rise for people like me. To calculate your per-minute cost, simply divide your monthly bill by the number of minutes you used.

My most recent month cost me about 12 cents per minute. What was your latest per-minute cost?