New study says Verizon and AT&T make over $600 million in overage fees annually

money-fist

One of T-Mobile’s early Uncarrier moves, and a point that John Legere continues to raise with regard to his competition, was to do away with overage charges for customers. Instead of charging customers extra when they exceed their purchased data limit, T-Mobile users see their speeds throttled to a slower rate. Sprint followed soon after and this past summer both Verizon and AT&T rolled out new plans that let users avoid overage charges in exchange for throttled speeds. A new study looked at both how lucrative the old plans were for carriers and whether it makes sense for users to switch.

The study, conducted by NerdWallet using information provided by My Data Manager, showed customers with Verizon and AT&T collectively paid over $600 million collectively in overage charges on an annual basis. These charges racked up from the 37% of smartphone users who occasionally go over the limit and the 15% who do so regularly according to a Pew Research Center study conducted in 2015.

While the revenue generated by overages is lucrative for the carriers and explains why they resisted no overage plans for so long, that does not necessarily translate to the new plans being better for consumers. Despite the benefit for the carriers, customers should still carefully consider whether a switch to a new overage fee plan makes sense. The same study found that for most customers the new plans usually are not worth it. The situation where it does make sense is when a user frequently goes over their data budget. Typically “frequently” would translate to collectively exceeding plan limits by at least 8GB per year.

If you made a switch to a Verizon or AT&T plan with no overage fees, what was your experience like? Did you succeed in improving your costs for wireless service?

source: NerdWallet


About the Author: Jeff Causey

Raised in North Carolina, Jeff Causey is a licensed CPA in North Carolina. Jeff's past Android devices include an HTC EVO, a Samsung Note II, and an LG G3, and a Motorola Moto X Pure Edition along with a Samsung Galaxy Tablet 10.1. He currently uses a Samsung Galaxy S8 and (very rarely) a Nexus 7 (2013). He is also using a Verizon-branded Motorola Moto Z Play Droid supplied by his job. Jeff used to have a pair of Google Glass and a Moto 360 Sport in his stable of gadgets. Unfortunately, his wife and kids have all drunk the Apple Kool-Aid and have i-devices. Life at home often includes demonstrations of the superiority of his Android based devices. In his free time, Jeff is active in his church, a local MINI Cooper car club, and his daughter's soccer club. Jeff is married, has three kids, and a golden retriever.


  • Paladin

    Switching to Verizon’s new plan would raise my current data plan by 1 gb, but it also raises my plan by $5/mo. That’s a cheap way to purchase and extra gb, but I don’t need it. I never go over my 3gb, so I’d be throwing away an extra $5/mo

  • Dylan Wentworth

    I predict T-Mobile will reintroduce overage charges at some point and of course they will package it as some great uncarrier giveaway just like they did with their latest 26gb plan.

    They’re conditioning subscribers to consume without worry at a fairly high entry level price of $75/mo, all the while making it difficult to use very much actual data without HD video and without high speed tethering.

    Somewhere along the line, they’ll do pretty much the last carrier-like thing they have yet to resume and that’s the overage fees. By then, they should do quite well with them since people will be accustomed to using their devices without worry. I see data buckets in our future. As a share holder, I can’t wait.

  • Ichigo Uzumaki

    Unlimited plan is the best. I’m still holing onto my unlimited plan on verizon and I’m not planning on letting go. I use my phone with no concern about the data I’m using. When T-Mobile introduced their new T-Mobile One plan I just laughed at the 26GB limit on the unlimited plan and having to pay extra to watch HD video.