Buying a new cell phone or upgrading your existing one usually binds you to an expensive two-year contract. At this point, you may be considering a prepaid cell phone to help save money. Here are a few things to keep in mind before you make your decision.
There are two popular kinds of prepaid phones: pay-as-you-go and prepaid monthly. The pay-as-you-go cell phones are easy. You buy the phone, purchase a set amount of minutes to install and you're done. Once your minutes get used up, you simply go to the store and buy more time, literally.
Another common option is the prepaid monthly plan. Like the name implies, you pay a monthly rate to the carrier, which can typically cost around $30 for 200 minutes a month, along with texting, data, messaging and email.
If those minutes aren't enough, you can always pay to add more time or, better yet, look into a prepaid plan that offers unlimited talk, text and data. These can cost between $40-50 a month, depending on the provider.
Those prices sound pretty good, but they do come with a few downsides. First, you'll have to pay the full price for your phone upfront, unlike standard cell phone plans which waive the cost in exchange for a two-year contract.
Your selection of phones will be more limited, as well, and depending on the carrier, coverage and data plans aren't usually as strong on prepaid phones. Still, prepaid phones offer the freedom of no contracts, credit checks, carrier fees or hidden government taxes.
If you're someone who doesn't spend too much time on your phone, going prepaid can potentially save you big over a standard plan. Assess your usage and carrier before you choose, because while cell phones are a necessity these days, the pricey contracts we can do without.
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Families with light to moderate data usage are the most likely candidates to find value in the shared-data buckets that AT&T and Verizon offer, says Maggie Reardon, senior writer at CNET.com and author of the site's Ask Maggie column. If one person tends to burn through a couple of gigabytes or more on her own each month, you may want to have her sign up for her own plan, or consider Sprint's unlimited family data plan.
Validas determined that a "well-connected" family of four with typical usage -- including three smartphones, one standard (or feature) phone, two tablets and a mobile hot spot -- would spend about $310 per month with Verizon's Share Everything plan. The tally for a family of four using smart phones with the Sprint Simply Everything family plan, which includes unlimited voice, text and data, starts at $390. But if you keep voice minutes to 1,500 per month, the Sprint price starts at $190 for a family of four.
A family of four who talk and text a lot could spend as little as $120 with T-Mobile's Unlimited Value-Plus plan, in which you bring your own compatible phones to the carrier. The plan includes unlimited text messaging, calling and data, but T-Mobile slows data speeds once you pass a 2GB threshold. For $180, you get 5GB of full-speed data.
If you prefer unlimited data usage (meaning data speeds won't be reduced once you reach a certain limit) with a big carrier, your only option is a Sprint plan. The all-you-can-eat Sprint Simply Everything plan runs $110 per month for unlimited calling, texting and data. If you're not a big talker, drop to 450 minutes per month for $80. For $70 per month, no-contract carrier MetroPCS provides unlimited talking, texting and 4G LTE data (meaning it operates on the speediest, most advanced data network), and it doesn't slow data speeds. On the $60 plan, you get 5GB of data before speeds drop.
Use your phone mostly for calling and texting? T-Mobile offers unlimited text messages and calls with no data service for $60 with a T-Mobile Classic Unlimited Talk + Text plan. Bring your own phone and pay $50 per month with a Value plan ($55 per month if you want to add 200MB of full-speed data).
If you're willing to go with a prepaid carrier, you can get unlimited calling, texting and, often, at least 2GB of full-speed data with a smartphone for $55 or less. With Boost Mobile, which runs on Sprint's network, you start with a $55-per-month plan for an Android phone with unlimited talking, texting and data. If you make on-time payments for 18 months, the price drops to $40. Straight Talk offers unlimited calling, texting and data for $45. The monthly savings on prepaid service usually makes up for the higher premium you'll pay to buy an unsubsidized phone.
For someone who pulls the phone out only in emergencies or to talk less than an hour per month, prepaid is the way to go. The T-Mobile Prepaid Pay As You Go plan gives you 1,000 minutes for $100, and you can use them for a year. Tracfone Monthly Value plans range from $10 per month for 50 minutes to $30 per month for 200 minutes.