Prepaid Cellphones Offer Inexpensive Alternative to Contracts

With the economy in recession, everyone should consider prepaid cellphones as a cheap alternative to the two-year contract plans offered by most cellphone providers. The New Millennium Research Council, a think tank funded by the telecommunications industry, says 29 million American adults rely on prepaid cell service, but that another 25 million cell users could lower their bills by switching to prepaid.

Early prepaid services featured absurdly high fees. Many would charge customers a dollar a day, even on days when they didn't place a call. That was $30 a month, on top of a per-minute fee when the phone was used. Prepaid services also saddled users with primitive, obsolete phones. Indeed, the prepaid plans had just one advantage - you didn't need a credit card to sign up. So prepaid plans were mainly used by poor folk, cash-strapped teenagers, and the occasional hoodlum.

Today's prepaid plans make financial sense for anybody who uses a cellphone for just a few hours a month. You can switch carriers easily enough, while keeping your present number. You'll probably have to buy a new phone, but prepaid companies offer lots of low-priced handsets; some are even free, after rebates.

You can still find lots of dollar-a-day prepaid plans, but generally they only charge you for days when you use the phone. In addition, such plans offer a fairly low calling rate of 10 cents a minute. Cellular carriers Verizon Wireless, AT&T, and T-Mobile offer such plans. But you can do better with "pay-as-you-go" services. The plans charge a higher per-minute rate, but you pay only for the phone itself and the amount of airtime used. Additional minutes can be purchased with a credit or debit card over the Internet, on a phone or with cash at thousands of retail stores.

T-Mobile has a sensible deal. Ten dollars buys 30 minutes of talk time - a costly 33 cents a minute. But for $25, you get 130 minutes - about 19 cents a minute - and $100 buys 1,000 minutes at a dime each. Minutes expire after 90 days, but if you buy more on-air time before the deadline, you can keep the old minutes.

A rival offer from Virgin Mobile charges $20 for 100 minutes of airtime, or 20 cents a minute. These minutes also expire after 90 days, but are renewed if more are bought. If you're a heavier phone user, Virgin offers a sweeter deal. Twenty dollars buys 200 minutes, but the minutes expire after just 30 days unless you buy more. So talk fast.

Another good plan comes from Boost Mobile, a prepaid service run by cellular carrier Sprint Nextel Corp. Boost's Paygo Basic charges a dime a minute no matter how many minutes are purchased. And it allows 90 days to buy more time and retain leftover minutes.

And there is also, TracPhone, not strictly a “pay-as-you-go” plan, but which offers a $10 a month plan which buys 50 minutes that automatically renew (20 cents a minute). Not bad for those with a low income who cannot afford a land line and just need minimal talk-time.

Don't expect an Apple iPhone or the latest BlackBerry when you buy prepaid service. Many of the available phones are bare-bones gadgets with few extras, though that's hardly a drawback for users who just want cheap phone service. But prepaid vendors now offer a fair number of stylish, versatile handsets.

-Adapted from “Prepaid cellphones offer inexpensive alternative to contracts” by Hiawatha Bray, Boston.com, December 11, 2008, http://www.boston.com/business/technology/articles/2008/12/11/prepaid_cellphones_offer_inexpensive_alternative_to_contracts/ retrieved 12/11/08.

 

12/08