However much you pay every month for your cell phone service, it’s probably too much; between $80-100 a month if you own a smartphone. But good news: Facing stiff competition from budget carriers, all of the major networks recently began offering cheaper “prepaid” plans – which could save you a ton of money.
Instead of entering a two-year contract, a “prepaid plan” enables you to pay monthly, without a commitment to stay with a particular service provider. These no-contract, prepaid phone plans used to be just for dumb-phones – you know, what the manufacturers call “feature phones” (but actually have few usable features). Or, you could get a great deal if all you did was
But then budget carriers like Straight Talk, Boost, and MetroPCS started offering monthly plans that included web access.
Consumers have done the math: Buying a phone up front and paying a lower monthly fee can be way cheaper than a two-year contract. And the demand for this kind of arrangement has shaken up the industry. According to a study by the NPD Group, by the beginning of 2013, 32% of all smartphone sales were prepaid models. That popularity has forced all the major carriers to roll out prepaid smartphone plans – and that’s on their super fast 4G and LTE networks.
So now the world has really changed. Today, you can find $30 a month plans for even the newest smartphones.
- If you’re a heavy talk and data user, the best plan is on Sprint’s network through Boost Mobile: $50/month for 2.5 GB of data. (Compare this to Verizon and AT&T’s plans – $60/month for 2 GB.) Better yet, if you make six, monthly, on-time payments in a row, Boost will knock $5 off your monthly bill every month thereafter. They’ll reduce your bill again at 12 months, and again at 18 months, so that after a year and a half you could be paying as little as $35/month – if you haven’t switched plans by then.
- If you don’t talk much but use a lot of web access (say, you’re a teenager), Virgin Mobile has a $35/month for 300 minutes of talk – and unlimited text and data.
- If you use a moderate amount of data but want unlimited talk and text, T-Mobile offers unlimited talk and text, plus 500 MB of data for $50/month.
- The cheapest deal I’ve recently seen form the big carriers: If you dig down deep on T-Mobile’s prepaid plan page, you’ll find a plan with only 100 minutes of talk, but unlimited text and data for – get this – $30 a month.
- And don’t forget the budget carriers who started it all: Straight Talk, Walmart Mobile, Ting, Giv Mobile, Simple Mobile. Many of these have $35 and $40 a month plans and if you’re willing to do the digging to find out about their coverage, speeds, and plans, they can be a great way to save.
Throttling: If you stream a lot of video or otherwise use a lot of data, some of these carriers will throttle your data - meaning they’ll slow your streaming way down
A prepaid phone is not the same as an unlocked phone: If you buy a prepaid phone from a carrier, it probably won’t work with another carrier’s service. If you buy an unlocked phone from a third party (like Amazon Wireless or Best Buy), you can use it with other carriers. But switching around has some limitations and you need to do your homework. Best bet is if you think you may want to switch carriers mid-stream, or if you travel a lot and want to pop in a local SIM card overseas, get an unlocked GSM phone.
[Related: How to Get Deals on Amazon]
What You Should Do
If your contract is up for renewal (or has already expired), you face a decision point – go monthly or enter a new two-year contract.
If you own a phone you’re happy enough with, this is a no brainer. Shop around for a monthly plan that will work with your phone. If you can go from $90/month to $50, for example, that’s a savings of $960 over a two-year period.
If you need to buy a new phone, you have to factor in the cost of that phone, and the math becomes a little trickier. For example, say you currently pay $80/month ($40/month for 450 voice minutes, plus $20/month for 300 MB of data, plus $20/month for texts) on AT&T. That’s $1920 over two years. You could cut that back to their somewhat comparable $60/month plan and save $480 over two years. But if you want to buy a new Galaxy S4, and bring that over, you have to factor in the $619 cost of the phone – comparing it to getting the same phone for $199 as part of a two-year contract.
|ATT/Galaxy SIV||Prepaid||2-year Contract|
|Total over 2 years||$2080||$2119|
This is the most expensive current phone on one of the most expensive prepaid plans, and you’d still save $39 by switching. But look at a different scenario where you buy the Galaxy SIII for $559 and go to T-Mobile’s $30 a month plan, which gets you 100 minutes of talk, unlimited text and data: You save almost $500.
|T-Mobile/Galaxy SIII||Prepaid||2-year Contract|
|Total over 2 years||$1279||$1969|
And if you’re willing to try a cheaper carrier and buy a slightly cheaper phone, or better yet, if you already own a phone, then prepaid will save you a ton.
- Technology & Electronics