Most people dread signing contracts, especially when it involves cell phones. We all assume there's a catch, even if there isn't. So what's the alternative? Prepaid mobile phones offer the convenience of standard, post-pay cell phones--but without a long-term contract.
"[Some consumers] don't want to be tied to a certain plan on a given carrier," says Lewis Ward, senior research analyst for wireless and mobile communications at research firm IDC. "A pay-as-you-go plan allows users to control how much they pay and when."
Prepaid service is ideal for people who rarely use their cell phones, prefer to limit their usage, or want a phone strictly for emergencies. A prepaid phone is also a good option for parents who want to budget their kids' cell phone usage.
Since the service is prepaid, there's no monthly bill, and unlike standard cellular services, prepay carriers don't require a credit check. Companies offering pay-as-you-go plans include AT&T Wireless, T-Mobile, TracFone, Verizon Wireless, and Virgin Mobile. As with any wireless service, coverage may be limited. Be sure to check the coverage map at each company's site or call the vendor before signing up.
Beware: Prepaid services expire. If you don't use your minutes within a specified period, you lose them. The only way to save your minutes and roll them over to the next cycle is by buying additional minutes. Also, per-minute charges on prepaid phones are pricier than fees for other plans. So if you plan on chatting a lot, don't sign up for a prepaid plan.
What's in the Bag?
Prepaid plans typically include local and long-distance calls, roaming, international dialing, voice mail, caller ID, call waiting, and three-way calling. The AT&T Wireless Free2Go service provides a few additional perks such as call forwarding and line blocking.
In addition to voice services, some carriers (including AT&T, T-Mobile, Verizon, and Virgin Mobile) allow you to send and receive text messages for a fee. For example, the T-Mobile EasySpeak service charges 10 cents for every SMS message that you send, although receiving one is free.
Want a fancy phone? Then prepaid services are not for you. The selection of handsets ranges from super-basic to moderately featured. T-Mobile, TracFone, and Virgin Mobile offer a few more choices than their competition. T-Mobile's phones include the basic Nokia 3390 for $70, the mid-tier Nokia 3595 for $100, and the small, clamshell-design Motorola V66 for $120. TracFone sells phones with monochrome screens (though not in every city), including Motorola's clamshell V60i and standard 120 and Nokia's 1100, 1221, and 5100 series; all models range from $40 to $100. Virgin Mobile offers the flip-style Audiovox 8610 for $120 and the Kyocera Slider V5 with a sliding cover for $150.
Pay As You Go
Getting a prepaid cell phone is almost as hassle free as buying a prepaid calling card from 7-Eleven. You'll need to buy a handset, pay an activation fee of about $25, and purchase a phone card with a specified number of minutes. The cost for the card depends on the number of minutes you choose, but typically ranges between $10 and $100.
With Virgin Mobile, instead of buying a card with an allotment of minutes, you buy any amount of minutes for 25 cents each; you purchase minutes online or via the handset. But the provider requires that you get at least $20 worth of minutes every 90 days to keep your account active.
Based on information gleaned from the carriers' Web sites, AT&T's Free2Go and Virgin Mobile's service offer the best deals. Both services provide 40 minutes of usage for $10, 100 minutes for $25, and 300 minutes for $75. This boils down to 25 cents per minute (which is pricey compared to post-pay plans). Virgin Mobile's bonus: After the tenth minute of a conversation, each additional minute is reduced to 10 cents. That's not bad, especially when you compare it to T-Mobile's EasySpeak service, which is 30 to 50 cents per minute.
Like many phone services, the more prepaid minutes you buy, the lower the per-minute charge. AT&T's Free2Go is a good option if you'll need hundreds of minutes. For a $100 prepaid card, AT&T gives you 665 minutes, deducting 15 cents for each minute you use--compared to 25 cents for its sub-$100 prepaid cards. But if you're in a roaming zone, AT&T (along with T-Mobile and Verizon) subtracts another 69 cents or more from your ration.
With all of these providers, when you run out of minutes, you simply buy more. Most carriers sell refills at their retail shops and/or at nationwide retail chains including Circle K, Circuit City, K-Mart, Target, and Walgreens.
How will you know when you're running low on fuel? Many carriers provide a way for you to check the number of remaining minutes on your phone. TracFone provides a particularly helpful tool: Its handsets display your Airtime Balance, which shows how many minutes you've used and how many minutes are left. AT&T provides a few options such as a text message alert and a pre-call announcement, a message at the beginning of each call notifying you of the number of minutes available.
Use It or Lose It
So what's the catch? Like a carton of milk, the minutes have an expiration date--usually 60 or 90 days after you buy them. And the cheaper the prepaid plan, the shorter the active period is. For example, AT&T's and T-Mobile's sub-$100 plans expire after 90 days, while both companies' $100 prepaid plan lasts for one year.
If you don't use your minutes within the specified period, you lose them. If your account is inactive beyond the expiration date, you'll likely lose your phone number, too. The only way to save your unused minutes and to roll them over to the following period is by adding minutes before the current ones expire.
Also, be realistic about your usage. Even if you use your cell phone frequently, your cost-per-minute charges will still be higher than a standard cell phone. It may make sense just to sign that contract.