Is Buying a Prepaid iPhone Right For You?

When you buy an iPhone from one of the big phone companies like AT&T or Verizon, the single biggest cost of owning the phone is the monthly fee for calls, texting, and data. That bill—often US$99 or more per month—adds up to thousands of dollars in just a couple of years.

What Is a Prepaid iPhone?

If you're looking to pay less but still enjoy an iPhone, you have options other than the major carriers. Prepaid phone carriers like Boost Mobile, Cricket Wireless, Net10 Wireless, and Straight Talk all offer the iPhone and generally charge $35-$60 per month for the same calls, texts, and data. That low monthly cost is pretty appealing, but there are pros and cons to the prepaid carriers to be aware of before making a switch—especially now that the big companies have adopted many of the prepaid companies' best features.

Buying a Prepaid iPhone: Pros

Lower monthly cost: One of the chief reasons to consider a prepaid iPhone is the lower cost of monthly plans. While it's common to spend US$100/month or more on phone/data/texting plans from the major carriers, the prepaid companies charge about half that. Expect to spend more like $35-$60 per month on a combined voice/data/text plan at the prepaid carriers.

Unlimited everything (sort of): The big phone companies carriers have all switched to unlimited plans—all the calling, texting, and data you want for a flat monthly fee—and the pre-paid carriers are generally the same (though many offer even-cheaper plans with limited data). Knowing exactly how much you'll pay each month no matter what you use sounds great, but there actually are some limits. Check out the Cons section below to learn about them.

Cancel any time, for free: One of the big advantages of the prepaid carriers used to be that you didn't have to sign a contract and could switch to a different phone company at any time. The big carriers locked you into using their service with contracts and early termination fees (ETF). These hefty fees were designed to prevent customers from switching companies too often. The big phone companies have since eliminated most contracts and most ETFs, so every phone company now lets you switch to another company when you want (unless you're buying a phone in monthly installments, that is).

Lower total cost - in some cases: Because their monthly plans are less expensive, prepaid iPhones can be cheaper to own over a few years than those bought through traditional carriers. It's not uncommon to spend over $3,000 on a new phone and service for two years with big companies. The same iPhone and service for two years will cost closer to $2,000. So, depending on what phone model and plan type you need, prepaid could save you a lot of money.

Get the same phones: In the past, prepaid carriers didn't offer the latest phones. That's not true anymore. These days, pretty much every phone company that sells the iPhone sells the same models, at the same prices.

No activation fee: The price of an iPhone at the traditional carriers includes an activation fee that isn't quoted in the sticker price. The activation fee for new phones isn't much, but it usually runs $20-$30. Not so at the prepaid carriers, where there are usually no activation fees.

Buying a Prepaid iPhone: Cons

Unlimited plans aren't truly unlimited: As hinted at earlier, "unlimited" prepaid plans aren't truly unlimited. While you really do get phone calls and text messages without end, there are some limits around data on these "unlimited" plans. It's common to find that your data plan includes a set amount of high-speed data each month and, after you use that, your speed is throttled to something much slower. So, technically the data is unlimited, but after the limit, it gets so much slower that it's frustrating to use.

Slower 4G: Unlike the major carriers, neither Boost nor Virgin own their mobile phone networks. Instead, they lease bandwidth from Sprint (this article lists what networks the major pre-paid carriers use). While Sprint is a perfectly good carrier, for prepaid iPhone users, this isn't entirely good news. That's because, according to PC Magazine, Sprint has the slowest 4G LTE network among iPhone providers—which means that iPhones on Boost and Virgin will be equally slow. For the fastest data speeds on the iPhone, you need AT&T or Verizon—or a pre-paid carrier that uses their networks (like Cricket or Straight Talk).

Complicated Personal Hotspot: When you use an iPhone on a major carrier, Personal Hotspot—which transforms your phone into a ​​Wi-Fi hotspot for nearby devices—is included in your plan. That's not true of all prepaid carriers. Some include a limited amount of Personal Hotspot data, some charge extra for it, and some don't offer it at all. If you need that feature, make sure to do your research first.

Not available in all areas: Buying a prepaid iPhone isn't as simple as walking into a store or going to a website and forking over your credit card. While that may be the case with the major companies, with some prepaid carriers, where you live determines what you can buy. When researching this article, we ran into issues with Net10 and Straight Talk. One provider said it didn't provide service in my area and so wouldn't sell me anything. After seeing my location, Net10 offered to only sell me one old, cheap Android phone. Straight Talk gave me more options, but all older Android phones, some of them refurbished, and no iPhones. We've never run into issues like that with the big companies.

The Bottom Line

Prepaid carriers offer a much lower cost on monthly plans, but that lower cost comes with a number of trade-offs. Now that the big phone companies have adopted many of the features that used to make prepaid carriers appealing—no contracts, no ETFs, unlimited data—that low cost is less of a selling point. If you're very budget-conscious, a prepaid carrier might still make sense for you. If not, though, you'll probably get better service, with fewer issues, with one of the major companies, even if using them costs more.