In a recent issue of the Retirement Millionaire, a retirement newsletter I’ve been checking out, they mentioned some frugal VOIP option I hadn’t heard of before. MagicJack is a USB based device that lets you make phone calls using your PC’s internet connection for $19.95 a year, or $1.66 a month. I currently use Skype as my VOIP service, in part because of weekly hour-long chats for the Personal Finance Hour , but that costs twice as much for unlimited US calling – $2.95 a month ($35.40, plus international fees because Skype is based outside the US).
I’m always looking for a good deal 🙂 so I thought I’d take a closer look.
How Does It Work?
You buy one of these magicJack units  (if you’re going to buy it, don’t buy it from Amazon because you can get it elsewhere for cheaper, I linked to them so you can read the 160+ reviews more easily) for around $40 and plug it into your computer. You then take your phone and plug it into the magicJack unit and viola, you have telephone service across the internet.
So what do you get for the $40? You get free service for the first year, which is normally $19.95, plus a phone number and unlimited local and long distance calls.
The product itself is not a scam but there are some significant risks you need to be aware of if you want to replace your regular phone service with magicJack.
Your computer needs to be turned on and your internet connection has to be active for you to make any calls. If you have a power outage or internet problems, you’ve just lost your telephone service. As for your computer, if you keep it in top notch condition, you probably will be fine. If you don’t, any slowdowns or blue screens of death are going to kaput your telephone capabilities as well.
In normal scenarios, that’s all fine. If you can’t make a call or have to reboot your computer, not a problem. However, in 911 scenarios, you might find yourself out of luck. If there’s a power outage, you can’t call out. Corded phones are powered by the RJ-11 phone lines, so in some power outages you can still call out (in an outage cordless phones are usually dead too).
Finally, the End User License Agreement for magicJack gives them the right to include advertisements. The Coffee Desk, in their review of Magic Jack , pulled up this gem:
You also understand and agree that use of the magicJack device and Software will include advertisements and that these advertisements are necessary for the magicJack device to work … Our computers may analyze the phone numbers you call in order to improve the relevance of the ads.
It turns out that back on January 17th, 2008, PC Magazine named it an editor’s choice, saying “So simple it’s almost perfect, the magicJack is the best home voice-over-IP gadget I’ve seen to date. Excellent call quality, a workable set of calling features, and an amazing price make this little box the VoIP wonder to beat.” (link )
But that was almost two years ago, what about today? In looking at the reviews on Amazon , they run the gamut in star ratings. You have 50 5-stars and 59 1-stars… I think this 3-star rating by Double W sums it up: “MagicJack is a mixed bag. It will save you money, but you do get what you paid for.”
If you’re itching to check out another review, Matt at Steadfast Finnaces swapped out Vonage for MagicJack  and shares his opinions. For him, it dropped the price of phone service from $300 to $20, not $35 to $20, so I’m not surprised to hear he was pleased.
For now, I’m going to pass. It’s not a scam but there are enough “yellow flags” (things I consider headaches, but nothing “bad” necessarily) that I’ll just stick with Skype. Since I have a cell phone, replacing Skype with magicJack doesn’t seem like a good value.
Have you used it? Know someone who does?