32 Comments

Summary:

These days, everyone’s looking for another way to cut costs. One relatively painless way is to make the switch to a prepaid cell phone plan. According to 2008 data from the Cellular Telephone Industry Association, of the 262 million cell phone subscribers in the U.S., only 16.9 percent of them are on prepaid plans. Here are five reasons that a prepaid plan might be right for you.

[qi:112] In these worrisome economic times, cutting costs is top of mind for many. But choosing a prepaid cell phone plan can be an easy and relatively painless way to save money. According to 2008 data from the Cellular Telephone Industry Association, of the 262 million cell phone subscribers in the U.S., only 16.9 percent of them are on prepaid plans. That’s far less than in other countries, including most developed nations, where the range runs from 37 percent all the way to 89 percent of the cell phone market, according to the CTIA. I doubt we’ll ever get to that 90-percent penetration mark, but below is a list of five reasons that a prepaid plan might be right for you.

  1. If a plain-old phone will work for you, and you’re willing to buy it up front: Most cell phones sold with contracts are subsidized by the carrier, which can help when purchasing a BlackBerry or an iPhone. But if you can tolerate a lower-end phone, a prepaid plan might work for you. For example, a refurbished Samsung A117 phone costs $19.99 from AT&T, while several basic refurbished Nokia models are sold for $9.99.
  2. If you keep your phone beyond the 2-year contract period: Prepaid services require a phone purchase up front, but for those who don’t switch phones or like using their old ones (surprisingly there are some GigaOM staffers who fit into this category), eliminating the contract also eliminates the prepaid phone subsidy carriers build into their monthly plan fees.
  3. If you talk less than 200 minutes a month: Plans from T-Mobile, Leap Wireless and MetroPCS are generally more economical than the cheapest post-paid plans from national vendors.
  4. If you have a bunch of friends and family members who are on different carriers: If you’re the only one with Verizon service in a family of Cingular users, you’re not able to take advantage of the ability to talk to friends and family who are in-network for free. And while you could switch carriers, you might find that a prepaid plan better meets your needs. Some providers, including AT&T, have prepaid plans that allow for unlimited in-network calling.
  5. If you rarely roam: This might not work for many of our readers, but it might for their kids. For those on family plans, choosing a prepaid option for a teen who doesn’t travel might make sense. Some prepaid plans offer “local” unlimited calling for as little as $30-$35 a month, including text messaging and picture messaging.
  1. One more reason to go with prepaid phone plans: Kids. Do not give postpaid phones to kids. Before you know it the costs are out of control.

    Oh – and here’s another one: If you lose a prepaid phone, the maximum damage is the value of your phone + the remaining value of the card. If you lose a postpaid phone, the maximum damage could bu much, much higher.

    Share
  2. We recently got Tracfones for our kids who needed the phones a few times a week for security and convenience – after school pick activity coordination, etc. We have been very pleased with the service. The minimum buy-in is $20/3 months which includes about 180 minutes. That’s less than $7/month/phone with NO additional taxes and fees that you get from the regular phone companies. PS – the phones themselves were only $10.each.

    Share
  3. “Some prepaid plans offer “local” unlimited calling for as little as $30-$35 a month”

    WHERE?!!

    Share
  4. does anyone know if you can port from postpaid to prepaid?

    Share
  5. @benn nguyen

    You need to be lucky enough to be in a market served by Cricket. That precludes quite a lot of the US.

    Share
  6. 4 virgin mobile phones in house for 3+ years. loving life w/o contracts and cheap phones…

    Share
  7. Stacey Higginbotham Thursday, December 4, 2008

    @benn. Jesse is right. Cricket and if you’re in Texas you can get service from Pocket Wireless. There may be one or two other regional providers like this.

    Share
  8. Aren’t we forgetting some pretty simple things though here regarding pre-paid anything…they DON”T have the same features as a full service phones…and without features we aren’t cool…according to my daughter.

    To keep up with the jones’s…how do we address this issue…

    in all seriousness, prepaid does not carry or even remotely come close to have the same technology running behind their infrastructure. By technology, i mean email, web, gaming etc…

    –Best,

    Share
  9. Stacey Higginbotham Thursday, December 4, 2008

    Chris, it apparently went without saying (my bad) that these aren’t for emailing and those searching for a web experience. But you’re right, they are for voice, pictures and texting for the most part. But there are still plenty of people out there who think that’s fine for a phone in any case. And I bravely imagine myself telling my now-two-year-old in a few years that if she wants email then she can pay for her own data plan. I’ll let you know how that goes :)

    Share
  10. As someone who’s happily used a prepaid cell phone plan for a few years now, it’s great to see this story on GigaOM. I find it puzzling and sad to see people spending more than they need on post-paid plans when prepaid plans would be more economical.

    Those considering prepaid plans may wish to consult http://www.cellguru.net/prepaid_compare.htm to see a compilation of prepaid offerings from different providers (I have no affiliation with that site.)

    At least with T-Mobile, I know one can use closer to 300 minutes per month, rather than 200 and still come out ahead with a prepaid plan.

    When buying refill cards, I’ve gotten the best deals from sellers on eBay; the price of refills can be over 10% below their “face value”.

    > does anyone know if you can port from postpaid to prepaid?

    T-Mobile allowed me to do this, about three years ago.

    Share
  11. I don’t use my phone a lot, even when I was on a plan. I can only hope someday that the prices will be more sane for the services. $0.20/text message, $0.10/min, +$1.75/day. I’ve managed to go from the smallest AT&T plan, 450minutes+5k night weekend, with taxes and fees, $60/month phone plan to spending about $25 every month or so give or take a few days.

    Prepaid needs to be by the second not minute. Rounding up a call with a length of 1:02, that’s one minute fifty two seconds, to $0.20 is complete crap. How do you expect me to believe any of this actually has a value more than a few cents perhaps even fractions. Just like the gas in my vehicles tank I like to control my habits, they even charge by the fractional cent albeit 9/10 of a cent, *shakes head*. It’s not like Mobile phone companies have a last mile infrastructure to support, they have towers, and radio wave licenses, which I am sure cost less than a Telco Central Office to build and maintain that is physically connected to locations.

    If my bank can do an overdraft protection to my credit card, the same should be true of the prepaid phone plan.

    While prepaid is nicer, it’s still a real pain in the you know what to pay them only when you need to, want to, on your terms. AT&T only lets you setup a cron job of sorts on their prepaid website to add funds weekly/monthly/daily?. I’m sure they love this, they get the same amount of money from people on a reoccurring basis just like the post paid contract. Will they ever make it “easy” to automatically add funds as needed? No.

    Share
  12. [...] happier with my prepaid mobile phone than contract. On GigaOm, Stacey wrote up something nice about prepaid mobile phones.  I left my comment, below, [...]

    Share
  13. There’s no reason why prepaid plans shouldn’t (in theory) include data.

    Here in the UK, there are numerous options – in one of my phones, I use a prepay SIM from 3UK, and just use it for mobile data. I get 1GB per month for £5 = $7.50. Virgin UK offers its prepay customers data for about $0.50c a day. O2 offers a prepaid Apple iPhone for $540, which comes with a year’s free flatrate data & WiFi.

    Dean Bubley

    Share
  14. Another vote for pre-pay: for those of us who ever speak to people outside our home country, the providers normally charge absurdly high international costs (same as their roaming costs) on a post-paid plan (PS: well done to the EU govt for smacking the carriers with anti-competitive legislation on the cartel they’ve got going with that…)

    e.g. on t-mobile at $50/month I would be charged hundreds of dollars a month just for a few hours of phone calls to/from US/Europe. Switch to pre-paid, and suddenly I get 2 hours of international calls for free if I spend $20 a month minimum. This appears to be pretty much the same with the other providers too.

    Share
  15. Same as Valarie – our whole extended family uses indestructible little Samsungs we got from T-Mobile. Moving over to pre-paid with them was seamless.

    Share
  16. I moved my wife’s account from Verizon postpaid to AT&T prepaid – kept the number and everything worked out very well. Once she realized that incoming calls were getting charged @0.25$ she lets certain calls go unanswered and then calls back using our unlimited calling plan for landline.

    Share
  17. Just as an aside about making international calls with a prepaid service… I do this somewhat frequently by coupling the prepaid with a prepaid voip service.

    VOIP providers, for example – localphone.com, gives you a dozen or so local numbers that you can dial directly and will call out internationally.

    It does feel strange however, paying per minute on the prepaid, PLUS per minute on the voip call out. I use T-Mobile which is 10 cents a minute for domestic calls, add to it the voip charges of 1.9 cents a minute for the international call out, and I end up paying 12 cents a minute to call internationally.

    T-Mobile seems to be the cheapest (10 cents/minute) rate for my area, but that’s not saying much.. it still a huge rip-off!

    Share
  18. Om,

    This is a really really poor post and not only does it not deserve to be a featured post it should not be on the site at all. This kind of shoddy reporting without insight and value is making me long for the time when Om had more time to write and less running around raising money.

    This is not a comparison shopping site for cell phone plans. Stacey you really need to start writing stuff that makes more sense. I read you name and skip the article.

    Hope fully you will listen.

    Share
  19. There are some prepaid providers that offer unlimited calling that’s actually are nationwide so you don’t have to worry about roaming fees. Also, as a rule of thumb, you CAN port your number from postpaid to prepaid, so losing your number shouldn’t be an issue in “most” cases.

    I’ve compiled a list of the largest carriers and most common plans, including per minute, per day, monthly, and monthly unlimited plans. You can find it here:
    http://www.prepaid-wireless-guide.com/compare-prepaid-plans.html

    Share
  20. [...] Malik | Sunday, December 7, 2008 | 10:23 AM PT | 0 comments Last week, Stacey came up with five reasons to consider prepaid mobile phone calling plans, especially in these tough economic times. Some wondered why we wrote about that topic, and to them [...]

    Share
  21. @birdiehunter

    You should keep away from sharp objects. There’s a reason this post has received a number of comments. Don’t be a hater.

    Share
  22. selfdefensedelhi Monday, December 8, 2008

    agreed in totality … does london limo also does that.

    Share
  23. The ability to pay by credit card easily is definitely one feature that would make prepaid be just as convenient as postpaid. While some carriers appear to only allow some set recurring payment, there are others that allow you to make your monthly payment (for monthly or unlimited plans) automatically, but also let you add as much money as you want whenever you want it. One common short code is to call #ADD (#233) from you phone. There are carriers that allow you to add quick amounts (ex. $10, $20, etc.) or you can select from an open range (ex. $10 to $99).

    Having autodraft protection for those using a bank account…well that’s a slightly different animal. If your bank has that feature then you’re set. If not, the carrier would have to build in such functionality to hit your bank, and if that fails attempt to hit your credit card. Usually the challenge here is that it can take up to 7-10 days before the ACH from your bank clears, so they wouldn’t be able to hit your card until that happened or you could end up with a double charge (one to your bank and one to your card). This type of feature is typically best controlled by the bank itself b/c they know the balance in real time.

    Anyway, hope this helps.

    Cheers,
    PrepaidWirelessGuy
    http://www.prepaid-wireless-guide.com/compare-prepaid-plans.html

    Share
  24. [...] Given the recession, T-Mobile is decreasing increasing the proportion of pre-paid customers it’s attracting. While the number is up over the fourth quarter of last year, only 43 percent of this [...]

    Share
  25. [...] Stacey Higginbotham | Thursday, February 26, 2009 | 7:21 AM PT | 0 comments Prepaid mobile phone provider MetroPCS today reported profits of $14.6 million for the fourth quarter on sales of $723.6 million. The carrier didn’t meet Wall Street earnings expectations after writing down more than $90 million in auction rate securities, but it has added a significant number of new subscribers thanks to its expansion into new markets and the economic turmoil driving folks to consider pre-paid phone plans. [...]

    Share
  26. [...] are in a price war, and if you’re on top of it, you can get unlimited mobile voice for $50 per month or less. I recently got $50/month unlimited service from T-Mobile, and Metro PCS is trying to take [...]

    Share
  27. [...] are in a price war, and if you’re on top of it, you can get unlimited mobile voice for $50 per month or less. I recently got $50/month unlimited service from T-Mobile, and Metro PCS is trying to take [...]

    Share
  28. [...] in December I took a look at five reasons to consider prepaid plans. While I caught some flak from readers who questioned why GigaOM would care about such things, with [...]

    Share
  29. [...] in December I took a look at five reasons to consider prepaid plans. While I caught some flak from readers who questioned why GigaOM would care about such things, with [...]

    Share
  30. For me.. I needed a prepaid phone for my kids. Net10 was awesome. I was saving sooo much money on it! I got it for my two tweens and I can control the amount of minutes they speak and text. It is by far the best thing for kids. Before I got Net10… my kids bills were OUT OF THIS WORLD. They would talk and talk and talk. Now they are completely controlled and they still love their phones! I got them each Samsung phones as well and they work like magic. Great service.. great connection.

    Share
  31. Prepaid is the way you should go. I bought a pay as you go Net10 phone for $30 and I pay only 10 cents a minute and 5 cents per text. Plus I don’t have to buy a certain amount of minutes for international calling which is 15 cents a minute. I just pay for what I use. I don’t see what could be better than that. I know what I am spending and I am saving an average of 50 dollars a month. We all know how much we need those savings.

    Share
  32. [...] smartphones and higher end devices to consumers at an unsubsidized price. As values go, prepaid isn’t a bad deal for certain people, and the addition of smartphones to the line up is a nice touch, although getting nationwide data [...]

    Share

Comments have been disabled for this post