Kick that Cell Phone Contract: Save with a Prepaid Plan
If you are married to your cell phone, you may not mind paying top dollar for your service plan. For many people, their cell phone has become their primary portal to the world, and that's fine, especially for cell phone companies.
But if you want, you can save big money by going prepaid. Here's how. First, let your cell phone contract expire. Then shop around for a prepaid plan. A prepaid plan, or pay-as you-go, is just that: a plan for which you pay for the minutes, usually by the minute, before you use them. It replaces the standard contract-based plan and the credit check and termination penalty fee that goes with the contract. Prepaid plans have long been popular in Europe, and are gaining ground here.
(But first, what is cheaper and better than a prepaid plan? Being added to an existing family plan. This option will have the most appeal for younger users like college students and 20-somethings. It does, however, require a little family diplomacy and accountability on the part of the user. Mom and Dad don't usually care to rescue you for late payments or lost phones.)
Prepaid wireless plans are the fastest growing segment in the market today. Good plans, like Virgin Mobile, can save you $20 a month on a plan that allows 400 Anytime Minutes per month. However, not every prepaid plan is cheaper than a contract-based plan, so it pays to shop around.
Prepaid plans can get you out from a monthly bill. Prepaid plans offer no hidden costs, don't have termination fees, and don't play to your weaknesses. You don't have to undergo a credit check. All of these reasons, and more, add up to savings if you get out from under that onerous contract. When you think about it, what other service requires you to sign up for years at a time and then penalizes you when you change your mind?
And it gets worse. Some companies extend your contract commitment for even minor service adjustments!
A half-dozen major carriers offer prepaid plans. These include companies like: AT&T, Net10, T-Mobile, Tracfone, Verizen Wireless, and the aforementioned Virgin Mobile. You can access some of these here.
You want to keep the math simple? T-Mobile charges $100 for 1,000 Anytime Minutes that last a year. If you are in the phone-as-a-last-resort crowd, that will last you a year — at $8.33 a month.
Downsides? There can be a few:
- Cost-per-minute charges can be higher (at least 10 cents a minute).
- Prepaid minutes expire (but you can keep minutes active for up to a year or more with some plans).
- You have to track your own usage.
- Texting involves extra charges, can be incoming only, or may not be offered.
- As with all cell phone plans, read the fine print first.
The word on texting is that major carriers don't offer much. But secondary carriers like Straight Talk Wireless, Cricket, and Alltel Prepaid offer prepaid plans with unlimited texting. They cost more, but if texting is your lifeline and you don't want a contract, they've got you covered for as low as $35 a month with Cricket.
If you text often, consider unlimited texting since it can be hard to track your usage.
Select a Plan, Buy Your Own Phone
You can select a company and buy your own phone on eBay. First, choose your plan, because you will need a cell phone that uses the same network. Contact a company representative and ask if you can sign up with your own phone. If the company offers a plan that includes a phone, expect a bit of a runaround before you get a straight answer. Obtain the network type name (like GSM) from the representative. Ask if a supervisor can verify the information if you don't trust the representative. Document the call for reference in the event you get a runaround when you go to sign up with your own phone. Then purchase a phone to match the service provider.
eBay offers a good selection of phones, and sellers usually provide the network information.
Some companies use the GSM network, while others use CDMA. You must know which protocol your intended carrier uses. Any GSM phone you buy must be unlocked. That is, its programming allows it to be used with different GSM carriers. ebay offers a wide selection of unlocked phones, beginning at about $20. Full-featured phones can be had for $50 - $75.
Here is a snippet from Wisegeek.com that succinctly describes the difference between GSM and CDMA:
Carriers operating on the GSM network use SIM cards. In the United Sates, this includes Cingular Wireless, now one with AT&T Wireless, and T-Mobile. Carriers that use the competing CDMA network do not yet use card-enabled phones. These carriers include Sprint PCS, Verizon and Virgin Mobile. The CDMA equivalent of the SIM card — the R-UIM — will be used by these carriers in the future.
Caveats and Contracts
Before buying, compare the cost of a prepaid plan with the provider's one-year contract price and read the fine print. The cell phone industry leads even the credit card industry in consumer complaints, so due diligence is advised.
If you change your calling habits (location, usage rate, texting, going to Canada, whatever) check your coverage to avoid surprises. Consumer Reports says you can save $100 a year by going prepaid. If you change your habits, even slightly, you can save much more than that.
Of course, for all of this to work, you have to get out of your old contract. To avoid paying a fee, stop accepting (or requesting) new phones and do not change the status of your service in any way. Contact your provider to see when your contract is due to expire. Hopefully, the company has a pro-rated penalty fee, so if you are halfway through a contract, you only pay half the full penalty. Or just wait it out. Do your research in the meantime. If you already "own" the phone you have, choose a network to fit it.
Prepaid plans require a little more…planning. But they remain a viable strategy to get out from under the yoke of a big-bucks plan while saving money at the same time — never a bad idea when times are tight or you just want a little more autonomy in your life.
This is a guest post by Steve Klingaman, a nonprofit development consultant and nonfiction writer living in Minneapolis. Read more by Steve: