Today's prepaid wireless carriers like Virgin Mobile and MetroPCS don't offer the iPhone. But they do sell fully-capable Android smartphones, along with an array of traditional featurephones. And they don't just offer pay-as-you-go minutes; they offer a la carte data and messaging plans, and some even offer unlimited plans.
What is a prepaid plan?
With most smartphone (and featurephone) plans, you sign a two-year contract with a major wireless carrier, like Sprint or T-Mobile. That includes a monthly fee which gives you a certain number of minutes and things, extra fees if you go over, and an Early Termination Fee if you decide that you want to switch before the end of your contract.
In exchange, you get to use your phone on one of the bigger nationwide networks for less than you would on a traditional contracted plan.
With prepaid, you pay the full cost of your smartphone up front and it's yours, no questions asked. After that, you pay the cost of your chosen plan each month, and if you don't like it you can just stop service without paying any extra fees. You aren't locked in.
What are the cost advantages if you have to pay up front?
It's true that you pay a bit more for your smartphone up front, on a prepaid plan. The LG Optimus S that I got was selling for $199, which is the subsidized cost of an iPhone 4S. This phone was more like a generic-brand iPhone 3GS, the model from 2009.
The thing is, this can save you money in the long run. Some prepaid carriers offer unlimited everything for much less than the major networks, as long as you're within their areas of coverage (which tend to include all big cities). Others, like AT&T GoPhone, let you choose how much you want to pay. I personally got burned by underestimating my own usage, but in the end the amount that I needed was still a lot more affordable than a normal AT&T plan would've been.
Who are prepaid plans not a good choice for?
Let's put it this way. If your heart skipped a beat at the sight of an "unlimited everything for $79" commercial, you probably don't want a prepaid wireless plan. Or, if you're one of the lucky few who was grandfathered in on one of AT&T or Verizon's old unlimited plans, there's no way it's in your financial best interests to switch.
Who are prepaid plans the right choice for?
People who can live without the latest smartphones, who are able to cover the cost of a smartphone up front, who live in a prepaid network's coverage area (some actually use Sprint's nationwide network), and who know how many minutes and megabytes they use on average per month are the ideal consumers for prepaid plans.
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