When you shop for your next cellular phone plan, you might wonder what your credit score can get you or be worried about the security of your data, conversations, and messages. One decision you might not expect is choosing between a postpaid and prepaid phone plan. However, both options exist, and each has its pros and cons. Since many consumers are already more familiar with postpaid plans, this comprehensive guide focuses primarily on prepaid phones. You can find out the most frequently asked questions regarding prepaid phones and their answers. Knowing how they work and differ from postpaid plans enables you to make informed shopping decisions that work best for your personal needs and budget.
What Is a Prepaid Cell Phone Plan?
Prepaid cell phone plans are something you pay in advance for your next month of service. You don't have to go through a check to activate your phone, and you also have the freedom to cancel the plan at any time. These are also called pay-as-you-go plans. Given the lack of a long-term contract, you can move from one plan to the next without penalties or fees once a paid month is finished. You can even load your account in advance with any amount of funds you choose. Doing so means you have more control over your spending and live without surprise bills appearing out of the blue.
Many consumers love the affordability of prepaid wireless phones. Some of the most economical plans are as little as $10 each month. There's usually no risk of overage charges. Many plans feature unlimited text and talk, and data plans simply stop when you hit the cap each month. However, data speeds might be slower in peak times.
Same Flat Rate Fee Every Month
Paying the same price for wireless phone service every month makes your monthly budget much easier to accomplish. You just carry the previous month's amount over into the new month's calculations. The specific calendar date the bill is due might shift a day or two, but it's going to be the same day of the month most of the time. Knowing when the cell phone bill is due will be highly predictable, and the amount of the bill isn't going to change much either. Fixed expenses are constants you can rely on to streamline your cash flow and keep your spending within the limits of any fixed or regular income that you receive. Recurring bills and payments of similar monthly amounts help you avoid late fees and cutoffs because you can usually time them to your paychecks and income. They're also opportunities to know your fixed costs so you can save the rest of your money for the future or other expenses. You might even be able to start saving consistent amounts of money for a rainy day fund.
Predetermined Amounts of Calling, Texting, and Cellular Data Usage
Some prepaid phones offer unlimited phone call minutes and text messages, but they typically feature caps on the maximum amount of wireless data you get each month. Others might offer limitless wireless data with the caveat that your connection speed will get throttled after a certain amount, and the slowdown might be so much that a particular feature isn't convenient or even usable. For plans that cap the wireless data, you can usually buy more per month in gigabyte increments. If you need a phone primarily for talking and texting, such data limits might not matter because you can skip using data anytime your phone has access to a Wi-Fi network.
Prepaid plans typically have serious restrictions in place for international calling, and you might not have roaming available when you travel outside the United States.
You Can Cancel Any Time
It's hard to go long in modern life without a phone as part of your daily routine, and that's where prepaid phones can be a huge advantage. Plenty of consumers have used them for years for fixed costs and flexibility, but sometimes they're good options for people who might be in between long-term contracts. Not getting locked into the same deal for months or years means you can change providers freely if you're not satisfied with your current carrier. If you have to move, the wireless coverage might differ in your new location, and a new network might work better for you. Also, prepaid phones can be a good choice to tide you over if you need a line temporarily while you save up for a new phone and the contract that comes with it. They're also a great stopgap if you're just not sure what your next long-term phone and contract is going to be.
You Can Start As Low as $10 a Month
Even before inflation hit levels not seen for generations, Americans were doing all they could to keep their regular bills as low as possible. Prepaid phones make it possible to do some of that. Pew Research reports that 97% of all consumers have smartphones, but they also average $1,350 annually on their phone plans. Part of that is financing the improvements in accessibility and technology in new models of smartphones. However, prepaid plans can often work with a phone you already own, and some cost only $10 per month. You can also shop around for just the features you need, such as SMS, talk, and data. Given how widespread Wi-Fi networks are, many consumers only use data for specific needs, such as navigating while driving. Activation fees are also rare in prepaid options, so the first month is no more expensive than any of the following billing cycles.
Perks of Prepaid Phones
There are quite a few perks you can enjoy when you shop the prepaid phones available and the wireless plans associated with them. If you're not sure what you want or need out of your next phone, knowing these can help you decide. Should you already know your must-haves and you see them on this list, then you're a step closer to your next phone.
No Contracts or Credit Checks
Prepaid phones let you make phone calls and send and receive text messages, and they can give you wireless data and mobile hotspot availability. Those features make the phones useful for communications, but the financial aspects are useful for your budget. Since you prepay for your services, there's no need for a contract. There are not even usually checks because you're not financing a smartphone purchase through a long-term service contract. This also means no deposits are necessary. If you are tight on money, don't have a lot of cash flow each month, or are still building your score and history through Equifax, TransUnion, and Experian, then a prepaid phone can help you on many fronts.
A Good Way To Manage Time Spent on Phones
Exploring prepaid phones is a good idea if you want to manage the time you spend on your phone. For all the benefits and productivity smartphones give adults, many find themselves spending too much time on them and want to cut back. You can accomplish that through willpower and discipline, or you could sign up for a prepaid plan that automatically limits how much wireless data you get each month. If you naturally have low usage patterns and just want a mobile phone for emergencies, this is another possibility prepaid plans can provide you. Some consumers are even eschewing smartphones and going back to more fundamental 'dumbphones' for just talking and texting. There are a handful of modern models available, but they're much easier to connect to a prepaid phone plan than long-term contracts.
Good Option for Parents With New Teens
It can be hard to decide at what age your kids get their first phone. Prepaid phones can be great choices for teenagers. You can monitor their data usage while balancing teaching them responsibility and encouraging individual independence. Keeping an eye on your teen is important, and giving them a smartphone is a chance to possibly track their whereabouts. Even if you don't do that, you can teach them how to manage finite resources by capping their data. If they want, they can pay out of their pocket for more data and start learning how to budget money. Should your teen lose their phone, prepaid phones might not cost as much to replace. Since you can shop prepaid plans for specific sets of features and limits, it's easy to tailor the service to the specific needs of each teen or child in your household.
Very Affordable
One of the ways that prepaid phone plans save you money is because you don't use the long-term contract to finance the cost of an expensive new smartphone. You usually need to have your own unlocked phone to use with the prepaid plan, but that also means you're not restricted to the phones that the carrier sells. Prepaid plans will probably save you several hundred dollars over the same years a contract might run. Even a prepaid plan featuring unlimited data might be $40 per month, whereas contract plans with the same unlimited data would be $70 per month. If you're someone who doesn't use data, capped plans can save you even more money. At the time of writing, AT&T was offering 16 GB of data for $25 per month; the data would slow down after the cap until the new month starts, but any unused data would roll over to future months. Mint Mobile and Tracfone are two other big names in prepaid phone services that offer high volumes of data at affordable price points.
Good for Privacy
Since prepaid phones don't require a long-term commitment, they work well for anyone looking to maintain their privacy. You might read about data breaches in the news several times a week on your smartphone, but that doesn't mean your personal phone has to increase your own risk level. Burner phones are disposable phones that are prepaid so you don't have to link your identity to the transaction. That provides a high level of anonymity for a while. Nothing is totally untraceable, and wireless carriers can turn over calling and traffic information to law enforcement. However, burner phones make it much more difficult for anyone to track your GPS location. If privacy matters to you, switching service providers and randomizing your usage makes it harder for you to get tracked. You can also use prepaid phones to avoid telemarketers or have separate lines just for online purchases, dating apps, and subscriptions.
How Many Benefits Could You Find Useful?
As you now know, prepaid phones have multiple benefits that might apply to your own life or family. These budget-friendly options feature predictable costs and flat-rate plans. You don't get locked into a long-term contract to enjoy financial freedom and flexibility, nor is a credit check necessary if your score needs work. If you're a parent, you can monitor the phone use of your children and teach them how to manage this aspect of their lives. Prepaid phones might have limits on international calling and wireless data, but you can usually buy more of what you need.