Can a Prepaid Cell Phone Save You Money?

Cell phones are ubiquitous in modern culture. They are vital for people of all ages, as they allow for constant contact and communication in an increasingly wireless world. However, cell phones can prove to be a huge cost burden. A basic $40 per month plan will cost a user $480 per year, plus taxes. Many people may not use their cell phone enough to justify such a high charge.

However, there is an alternative to traditional cell phone plans that operate on contracts. All of the major cell phone companies, along with some other telecommunications firms, offer prepaid cell phone plans along with their regular offerings. These plans always operate without a contract, so there is no penalty for abandoning a plan and switching to another provider. Prepaid cell phone plans are often more expensive than traditional plans on a per-minute basis, but they provide value for those consumers who use their phones sparingly.

Where to find Prepaid Plans

Verizon, AT&T, T-Mobile, Alltel, and other major cell phone companies offer prepaid plans on their websites. These prepaid phones work using the regular contracted phones' network, with rare exceptions. According to their websites, other prepaid-only companies, such as Tracfone and Virgin Mobile, buy the usage rights to the telecom giants' networks, providing equally reliable service. Generally, prepaid phones are no more or less reliable than contract phones.

How Do Prepaid Plans Work?

Prepaid cell phone plans generally work on one of two systems: pay-per-minute, or pay-per-month. On pay-per-minute plans, each minute used is debited from the user's account at a predetermined rate, generally from ten to twenty-five cents per minute. The account is funded either with a credit card online or with a prepaid card that can be purchased at convenience stores and other big-box retailers nationwide. Text messages or other premium features are debited from the same account. Companies often require a $20 payment to the account every 30 or 90 days, regardless if the account has money or not. Check with your provider to make sure your minutes don't expire at the end of each period.

Prepaid cell phone companies also offer pay-per-month plans that often provide a little less value than a contracted plan. It is usually easy to switch between plans month-to-month without any additional charges.

How Much Do Prepaid Plans Cost?

According to their website, T-Mobile currently offers the cheapest prepaid cell phone plan. By purchasing a $10 prepaid card every 90 days, a user can own a cell phone for a little as $40 a year-much cheaper than the $40 a month using a contract plan. Generally, sparse talkers can expect to pay $80-120 per year for their cell phone using a prepaid plan. If you talk or text a lot, prepaid plans may not be the best use of your money, so make a note of your monthly talking habits and see which plan will fit you best.

What About the Phones?

Prepaid cell phones themselves are often a mixed bag. Each company has a different approach to their phones-according to their websites, Virgin Mobile creates exclusive phones, Tracfone uses major manufacturers such as Motorola and LG, and some companies like T-Mobile allow you to turn any T-Mobile phone into a prepaid phone using a new SIM card. However, since the cost of cell phones is often subsidized by contracts, prepaid phones sometimes cost more than their contracted counterparts. Otherwise, expect a phone with fewer features, and potentially of lower quality.

Wrapping it Up:

You'll have to do some research to figure out if prepaid cell phone service makes sense for you. If you're a heavy talker or texter, you may want to stick with your contract plan. However, if you don't talk a lot and are tired of paying $40 per month for only a few minutes, consider switching to a prepaid plan. The yearly savings can be enormous.

References:

1. T-Mobile, Prepaid Calling Plans

2. Virgin Mobile, Prepaid Cell Phones

3. Tracfone, Buy Phones - Nationwide Prepaid Wireless