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