What is Proration?

If you're lucky, the rep at the kiosk will do a good job and set the expectation for you and tell you a little bit about your first bill! What should you expect? What is bill shock? What do all these numbers mean? No worries, you're not the only one asking these questions (and more) and I am here to help you out! Read on for what to expect on your first bill and a simple explanation of what the heck proration is!



Proration is word that a lot of cell phone people (and sometimes TV and Internet providers etc) will throw around assuming their customer knows what they're talking about. A lot of retail people forget that their customer doesn't deal with things like proration on a daily basis and make the awful mistake of not explaining it to their customer. This can sometimes result in the customer suffering from a case of "Bill Shock" a couple of weeks later when they get their first bill, open it, and it's nothing like what they were expecting or what the rep at the cell kiosk said it would be like. Uh oh.

Not to worry. Proration is normal and should be expected on your first bill. It is not a hidden charge and your cell carrier is not out to get you.

Proration is simply the charge of the days you use your cell between the day you activate it, and your billing date. Let me explain.

If you were to activate a phone today, it's almost guaranteed that today is not your billing cycle date. So what the carrier does is charges you to use your new phone from today until your billing cycle date. They also put the first month of your monthly plan on the first bill, plus tax. So on your first bill, you will have the prorated amount, your first month and tax.

It stands to reason that you will want to use that shiny new phone you just got right away, rather than having to wait until your billing cycle date to use it, so they simply divide your monthly rate by the number of days in the month to get a daily dollar amount and charge you that per day until your billing cycle date.

The absolute best case scenario is that you just happened to activate on your billing cycle date (which means you would not have a prorated charge on your first bill) or worst case scenario, you activated on the day after your billing cycle date (which would result in two months showing up on your first bill). If you fall in the latter, your cell carrier will charge you the daily usage rate (your monthly plan divided by the number of days in the month) for each day of usage until your billing cycle date, which if you happen to activate the day after your billing cycle date means you have to goa full month before the next one, which results in a second month charge.

Phew! I hope you were able to follow that! But you might be asking "Why isn't my billing date the day I activate my phone?" or "What determines my billing cycle date?" Great questions!

Typically, Cell phone carriers have set billing cycle days throughout any given month just for the sake of simplicity - it's much easier to have two or three days throughout the month that are bill due dates for your customers than it is to have 30 - that would be a lot of unnecessary paperwork and administrative work. From what carriers have told me, the postal code of your residence is what determines which billing cycle date you will have. It's all an automated system built for simplicity, one of the results of which is proration.

And just in case you would like one, here is an example:

You activate your phone on May 1rst.
Your postal code billing cycle date is the 5th of every month.
Your cell plan is $40 per month.

There are 31 days in May.
In this example, you activated your phone 4 days before your billing date.

Your monthly plan ($40) divided by the number of days in the month (31) equals: $1.29 daily charge.

Your first bill will be: 4 X $1.29 + $40 + tax.

And this is how you calculate (and understand) proration!