With the slow extinction of the cell phone contract, consumers have been granted more freedom than ever before to act thrifty, be fickle, and shop around for the best cell phone deals. The old status quo used to be in the form of a 2-year contract that kept you locked in: forced to keep your phone, your plan, and the hefty monthly rates until you were set free.
Prepaid cell phones offer salvation from the long term contracts and expenses heaved upon you from a contract phone. A little-known alternative, most people associated prepaid smartphones as burners or older generation devices. Nowadays, however, you can buy some of the latest devices--through a prepaid option--save hundreds of dollars each month.
So why should you consider a prepaid cell phone?
How do prepaid cell phones work?
As I explained, prepaid cell phones are often a cheaper alternative to purchasing a smartphone on a normal monthly payment plan. Consumers are slowly catching on to the benefits (which I'll explain more about below). as over 50 million people used a prepaid phone card in spring 2016, and this trend is only bound to grow more. Most cell phone companies now provide prepaid cell phones to meet this growing demand.
What makes prepaid cell phones such a great deal?
Before I weigh the benefits against the potential pitfalls, let me first explain how a prepaid cell phone works. A prepaid phone enables you to pay for minutes, texts, and data in advance, so you have greater control over your spending and usage.
Flexible Payment Options
Where normal cell phone plans are quite confusing, purchasing and setting up a prepaid phone and plan is quite easy to understand. Setting up or refilling your prepaid phone works in three different ways:
- You buy a card which has a set amount of minutes, texts, and data stored on it. Convenience stores, gas stations, and even some major department stores sell them, but you can also pick them up online.
- You can pre-purchase service through a cell phone company. Some companies offer the option to buy a set amount per month with an auto-fill, so you never go without service.
- You can set up a pay-as-you-go model through a service provider, where you are charged for each minute, text, and data used. Perhaps for the ultimate budgeter, this method ensures you only pay for what you use.
What are the benefits of a prepaid cell phone?
There are several reasons to consider purchasing a prepaid cell phone and plan. First and foremost, you aren't tied down with a contract. With the freedom granted by a prepaid phone plan, you can switch carriers or cancel service whenever you want.
Here are some more important factors on why you should consider a prepaid phone:
- No credit check or deposit. No information or restrictions regarding age, identity, or address.
- Set up a separate line just for your business.
- Those who tend not to use many minutes or data, such as senior citizens, won't have to pay for what they won't use.
- Carefully manage usage--great for budgeters and people who frequently go over the minute or data allotment.
- Generally fewer hidden fees, service charges, bizarre taxes, and costs.
What are the disadvantages of a prepaid cell phone?
You might be thinking, "Prepaid phones are great--Why wouldn't everyone use them?"
That's a great question to ask, and the answer is quite obvious.
Unlike traditional cell phone payment plans, where the cost of the phone is subsidized and paid over the course of 24 months (sometimes longer, sometimes shorter), a prepaid phone is paid in full upfront. Instead of $20 or $30 a month for the latest iPhone, you could spend upwards of $800 at once. Understandably, this can be a major turnoff.
Here are some more potential pitfalls before you buy a prepaid phone:
- Not every phone will work with a prepaid service.
- You might have to get a new device if you plan to switch cell phone service providers.
- You might not be able to transfer your number. However, most carriers allow you to submit your number and other phone details and will tell you if it is possible to keep your current number.
- Without Auto-fill, your minutes, messages, and data expire at the end of the month or when used up. You might run out of service halfway through the month if you aren't careful.
Prepaid cell phones save you money
Before you choose a prepaid phone--or any smartphone, really--it's important to understand how you use your device. Make note of your usage habits, how many calls you make and texts sent. Go ahead and try out our data usage calculator, which can suggest a cell phone plan most suited to your lifestyle.
For more information, we suggest you check out our in-depth analysis of prepaid versus postpaid plans. In that article, we weigh the pros and cons of both types of payment methods.
Before you make a purchase, check out our buyer's guide to prepaid smartphones for reviews, analysis, and recommendations. For the ultimate budgeter, we have a special roundup of our top picks for prepaid smartphones under $100.