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Is a Prepaid Cell Phone Plan a Good Idea?

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Maria Neira
October 30, 2020

Let’s all just admit it: We can’t live without our cell phone. But with the average cell phone plan costing $99 a month, is there a way to lower this monthly bill? 

Fortunately, the answer is yes. By switching to a prepaid phone plan you could save money while still getting the features and data you need. Unlike a traditional cell phone plan, a prepaid cell phone plan charges its users at the beginning of the month rather than at the end of the month. 

Prepaid plans come in every shape and size in terms of pricing and features. A study from ItsWorthMore.com found that switching to a cell phone plan with a data cap such as a prepaid plan could result in a savings of $268 a year. 

Here's what you need to know about prepaid cell phone plans and whether switching is the right choice.

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What is a prepaid phone plan?

A prepaid cell phone plan is exactly what it sounds like. You make your monthly payment to the phone carrier at the beginning of the billing cycle rather than at the end. While the big-name carriers like AT&T and Verizon offer prepaid options, there are several other carriers that offer lower cost plans with the same features such as unlimited talk and text.

These value carriers are known as mobile virtual network operators, or MVNOs. They don't own the physical communications network their customers use. Instead, they lease the communications equipment from the larger companies like AT&T, Verizon and T-Mobile. 

Some MVNOs are a subsidiary of one of these major carriers, but others operate independently.

Benefits of a prepaid plan

  • Lower cost
  • No contract
  • Lower taxes
  • No credit check

Prepaid cell phone plans have long been considered a less expensive option for users. 

In the past, prepaid plans offered very few options, and some didn't even offer access if you were using a newer phone. Fortunately, many of those drawbacks of using prepaid phone plans have been eliminated in the last decade as MVNOs entered the market. 

Lower cost. The biggest benefit of using a prepaid cell phone plan is the less expensive monthly cost. One of the ways that prepaid companies offer lower fees is by requiring an up-front purchase of a cell phone. 

However, you can avoid that cost by choosing to use your own phone. These are known as bring your own device plans. Some carrier plans also offer phone rentals in order to maintain a low monthly cost.

No contract. Another benefit of a prepaid plan is that there is no contract involved in getting the service set up. In fact, some of the major carriers have done away with their contract plans because of the increased interest in prepaid phone plans and MVNO plan options.

Lower taxes. A final perk of using a prepaid cell phone service is the difference in taxes applied to your bill. Traditional cell phone plans include a long list of confusing taxes on each monthly statement - sales tax, universal service fund surcharge, state and local taxes. All those taxes can add up to hundreds of dollars a year. 

Meanwhile, prepaid phone plans typically only include sales tax on phone purchases - not on your service. 

No credit check. If you don’t have the best credit at the moment, a prepaid cell phone plan could be a good option. These carriers typically don’t require a credit check for its customers. 

What carriers offer prepaid phone plans?

The popularity of MVNOs has been growing considerably over the years thanks. Today, some of the major MVNOs are well-known names. 

  • Cricket Wireless
  • Consumer Cellular
  • Google Fi
  • Mint Mobile
  • Metro by T-Mobile 
  • Simple Mobile
  • Ting

If you’re currently on a plan with a traditional major carrier and aren’t ready to switch, you can look into their prepaid phone plan options. However, keep in mind these carrier plans often come with higher monthly prices.

How to find a prepaid plan that fits your needs

The best way to find a prepaid phone plan that suits your needs is to consider the four most important facets of cell phone service:

  • Monthly cost
  • Phone options
  • Network coverage
  • Features

If you're someone who mostly uses their cell phone for talking and text, a prepaid phone plan is a smart choice. You can find a plan with unlimited talk and text for as low as $10 or $15 a month.

If you're a heavy data user, you can also find a prepaid phone to meet your needs. Many carriers offer prepaid plans that offer data ranging from 1GB to 15GB a month. Unlimited data plan options are also available from most carriers.

The nation's most popular prepaid plans use the most reliable and established networks, so you likely won’t notice any difference in the quality of service when you switch from a traditional carrier’s plan. 

Today's prepaid phone plans are an excellent choice for anyone who wants to save money each month and not deal with burdensome contracts.