Prepaid Cell Phone Plans Save Money But Remain Unpopular with Consumers
You might have heard a lot about prepaid phone plans of late, largely due to the magnanimous occasion of iPhones becoming available for pay-as-you-go plans. You might also have wondered if prepaid is truly a cost effective option in this day and age. The New York Times did the math and discovered that, yes, prepaid phone plans generally offer lower monthly service rates on mobile phones that are purchased at full price. But the Times also points out that, despite this, prepaid plans haven't swayed many customers to switch.
This may have something to do with the initial cost. There are no contracts involved, so there is no subsidized smartphone pricing. Thus, a new iPhone will cost significantly more than one with a 2-year contract attached to it.
Despite the hefty initial investment, the monthly cost of a prepaid phone plan is often one third or less than what most people pay under traditional contract-based service subscriptions. The Times estimates that the cost of a prepaid iPhone with Virgin Mobile over a 2-year period is $1,000 less than an iPhone with a 2-year contract on AT&T. Moreover, prepaid service plans offer unlimited data, which is unheard of on most contract-based plans.
And yet, in spite of the prospect of a better bargain, cell phone users in the U.S. have not flocked to prepaid plans the way they have in other countries. In Europe and Asia, contract-free plans are the norm. But according to research cited in that same Times story, only 23% of wireless customers in the U.S. utilize prepaid phone services.
While 23% may not look like much of a following, over the past three years, the U.S. prepaid market has been growing steadily. Keep in mind, limited service options and basic mobile device offerings have long relegated prepaid phones to a kind of underclass of cell phone service. Those perceptions, however, are rapidly changing as the growing demand for usage-based charges push more prepaid cell phones into the market. However, the biggest game changer by far is the recent introduction of the Apple iPhone into the prepaid phone market.
If you're considering leaving the contract world for prepaid, here's the first thing you need to know: Opting out of a contract agreement to a prepay plan will require you to buy a new phone, and vice versa. An exception to that rule may be if you're switching from contract to prepay under the same cellular carrier, such as Verizon. But, even then, you still may be required to purchase a new phone since not all Verizon phones are eligible for prepay plans. Incidentally, all nationwide mobile networks offer prepaid plans.
If you're starting your search from scratch, having a specific phone model in mind, such as an iPhone, will narrow your carrier options down substantially. Of today's top prepaid carriers only two currently offer the iPhone: Cricket and Virgin Mobile. Another top prepaid carrier, Boost Mobile, online sources say, will be following suit in September.
Next, search for critical reviews of any carrier, and don't be afraid of scrutinizing features and services, as sometimes seemingly straightforward claims can be misleading. For instance, online reviews of Cricket emphasized the need for quotation marks around its "unlimited plan," which consumers found to be more applicable to voice than data. Under Cricket's $55 "unlimited plan," consumers discovered a 2.3GB fair-use cap on data.
Do you pay too much for cell phone service? Should you go the prepaid way? What bothers you about contract service plans and what stops you from switching to a no-contract plan? Sound off in our comments section below.
Front page photo credit: Gadgetic World
to ATT's pre-paid service.
COMPLAINT - ATT obligates a customer to buy $25.00 plus fee, every three months, whether or not you have dialed from their service. As a result, you are feeding ATT your cash. And cash, and cash, specially
if you have little need for a phone. The friendly programs, minimum $10.00 a month for emergencies are
gone. And it still is expensive to spend that money for one call to American Express towing service.
Who does have a reasonably priced pre-paid? With $40 dollar monthlies, the monthlie is still looking good.
My minutes on my Hong Kong SIM card are good for 6 months.
My minutes on my Italian SIM card are good for 1 year!
AND - you can recharge your card at nearly any newsstand, 7-11, etc. and any recharge renews the time period for ALL your time.
In the USA minutes expire every month. Why is that? We have paid for them!
In addition, the time is so cheap that I can hardly use it up - even calling the USA at 6-10 cents a minute. We are being so gouged here in the USA.
Also, Solavei runs on T-Mobile's network with free roaming onto AT&T for awesome coverage. T-Mobile has done some serious upgrades to their network in the last year. I have a cheap 3G android phone, but even on 3G I am getting download speeds from 3-4 Mbps and uploads around 768 to 1025 Kbps. I was blown away by the speed. T-Mobile has been sinking 4$ billion dollars into upgrading their network and it shows.
If anyone is interested, here is a site with more info: ttp://marketyourmobile.com]
With no data, I was paying ~$30 in a family plan of 3 sharing 750 min.
Now I am in a value plan of 5 people, with 2 having unlimited voice and text, 3 having 500 anytime minutes & unlimited text. Monthly cost is ~$20 each person. Got it as a big deal. For those interested, it is value plan unlimited + $0 add-a-line fee until 2014 + 15% discount from my college.
I thought about H2O wireless and people complain about its customer service a lot. H2O is pretty cheap, $10 for 200 min or $25 for 500 min in a month. Also thought about AirVoice and it is also cheap like $10 for 250 min.
I don't have data with TMO but with prepaid I can use data occasionally. I am not big data user since WIFI is everywhere.
Post-paid: has unlimited night and weekend minutes. With 500 min, it is not easy to exceed the cap for me.
Prepaid: you have to pay for every minute you talk. But you can pay less if you talk less.
I talk like a few hundred minutes a month. A large portion could be done via Google Voice. Guess I could choose to save maybe $5 per month by using prepaid (that is ~$15/mon).
I use a monthly pre-paid plan from PagePlus. They use the Verizon network, so you get great coverage. Unlike what this article states, you can use an old verizon phone and you don't need to buy a new one. I bought a second hand Droid 2. If you buy used, be careful to get a phone with a clean ESN, otherwise the cellular carrier will not activate it. I pay $30/month, no additional hidden fees and taxes, for 1200 mins of talk, 1300 texts and 100mb of data. I never get close to my limits for talk and text. I'm careful with data usage, so I have not come close yet. It also helps that 90% of the time I am near a WiFi hotspot.
I've done the math and I save over $400 a year over the cheapest verizon plan that has data. I also get to switch phones whenever I want. I'm easy on phones, so there is no reason for me to switch phones every 2 years.
For those who don't need the data and just need a phone for emergencies or occasional calls, Tracfone often offers specials on phones with double or triple minutes for life. On top of that, using a webcode can bring it to quadruple minutes. Tracfone minutes are relatively expensive, but it can still end up being a good deal for some people.
A final caveat on pricing: Prepaid carriers do not offer discounts for federal/state/military/university employees as do postpaid carriers. Consequently, for those people--especially those on a family plan--prepaid may not save them any money at all and may even be more expensive. For everyone else who has only one to two smartphones, prepaid is usually a better deal.
Then again, for those with kids, prepaid ensures you never receive unexpected overage charges, so whether or not you save a lot of money, it may be worth it if only for the peace of mind.