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Is Prepaid Wireless or a Monthly Contract Cheaper?

Analysis compares scenarios with 200, 400 and 1,000 minutes at many carriers

By

Virgin Mobile

Virgin Mobile

Image © Virgin Mobile
Updated October 12, 2009
While communicating on your cell phone can now be considered a basic human necessity, scoring you as an ongoing customer is a business need for a sea cell of phone companies competing for your wireless dollar.

Just as you now have a wide variety of cell phone service carriers to choose from, so do you have many ways to pay for the same service. Is a monthly contract for one or two years right for you or might no-contract prepaid wireless be your holy grail instead? What’s the difference and how do you know?

This analysis will help you debunk the confusion between the various plans and analyze your unique situation to see which most fits you like a glove.

The Benefits of Prepaid Wireless

The first most commonly cited advantage of prepaid or pay-as-you-go wireless is not being bound by a monthly service contract.

U.S. carriers have been binding customers to contracts for years and penalizing them for early termination fees in the amount of $150 or $200. Such carriers then discount the cost of their cell phones when a customer is willing to commit to a contract. That’s the give and take.

This is a very different story in Europe. Prepaid wireless is much more the norm there and Europeans are now used to the flexibility without the jail sentence. In a time of economic uncertainty, though, even the U.S. is starting to fall in love with prepaid wireless and more consumers are finding themselves converting.

A second primary benefit of prepaid wireless is that there are no credit checks required. Especially in uncertain economic times, many Americans have found their “excellent” credit slip or many might not have had such stellar credit in the first place.

One black mark in the past could still be haunting your credit score years later. It could take you quite a while to make up for past or current credit mistakes likely due to low funds, maxing out a credit card, being late on payments, defaulting on payments or going into foreclosure or bankruptcy.

Prepaid wireless companies are willing to call you a customer even without a contract because you’re doing just what the name implies: paying for your minutes in advance. Even with no contract and the ability to bolt at any time, prepaid companies are willing to remain blissfully ignorant about your credit because they know you’ll be paying in advance for whatever you plan to use.

The Potential Drawbacks of Prepaid Wireless

On contract-based plans, your minutes don’t “expire”. If you buy 1,000 in a month and don’t use 200, you just lose them and move onto the next month. Some plans (such as with AT&T) will even allow those unused minutes to “roll over” to the next month.

With prepaid wireless, though, you often need to use what you buy. If you don’t, they can expire. Make sure to read the fine print before selecting a prepaid wireless plan to understand if your minutes will expire and when. In addition, some prepaid minutes might cost more than they would with a contract.

Analysis: Prepaid Wireless vs. Monthly Contract Plans

So when would prepaid save you money over contract-based plans and vice versa? We’ll now put that very question to the test by comparing many plans from various cell phone service carriers. With data current as of Feb. 16, 2009, this analysis takes such a comparison a step further than an earlier analysis of Virgin Mobile versus Verizon Wireless.

Virgin Mobile is often synonymous with prepaid wireless and oftentimes pops into the minds of consumers first when considering such a route. Why? The hip company keeps its pay-as-you-go-pricing low, doesn’t require commitments and (unlike the warning mentioned above for typical cases) even allows your prepaid minutes to roll forward.

Virgin Mobile has even rolled out an especially attractive plan with unlimited voice minutes for $49.99 per month with no contract.

The various scenarios below compare three common amounts of minutes used per month – 200, 400 or 1,000 minutes – at Virgin Mobile, Boost Mobile, Net10, T-Mobile, Verizon Wireless, Tracfone and AT&T so you can see which carrier gives you the most bang for your buck. For the purpose of this analysis, carriers were only included with true nationwide coverage (i.e. Cricket Wireless didn’t make the analysis for not meeting this criteria).
    200 anytime minutes per month with Virgin Mobile:
  • 30-day minute pack with no contract: $20 or 10 cents per minute
  • By the minute with no contract: $26.99 or 10 cents per minute (including a $6.99 monthly fee)
  • By the minute with no contract: $40 or 20 cents per minute
  • Monthly plan with a contract (plus 500 minutes on nights and weekends): $25
  • Note: Text, picture and video messaging is $5 a month extra for 200 messages, $10 for 1,000 or $20 for unlimited on the no-contract plans. The mobile Web is $5 a month extra for 5 megabytes, $10 for 20 megabytes or $20 for 50 megabytes.
    200 anytime minutes per month with Boost Mobile:
  • Pay as you go with no contract: $20 or 10 cents per minute
  • No monthly contract plan offered at this level (but $50 for unlimited minutes)
  • Note: Text messaging is 10 cents per message with no contract. Picture, audio and video messaging is 25 cents each. The mobile Web is 35 cents a day for unlimited use.
    200 anytime minutes per month with Net10:
  • “Airtime on demand” with no contract: $20 with 30 days of service
  • No monthly contract plan offered at this level (but 250 “easy” minutes for $25 with no contract)
    200 anytime minutes per month with Verizon Wireless:
  • $27.92 with no contract using eight 99-cent days (“Core” plan at 10 cents per minute), $25.92 using eight $1.99 days (“Plus” at 5 cents per minute) or $27.92 using eight $2.99 days (“Power” at 2 cents per minute) with various expirations
  • No monthly contract plan offered at this level (but 450 minutes for $39.99)
    200 anytime minutes per month with T-Mobile:
  • $28 using eight $1 pay-by-the-day days at 10 cents per minute
  • No monthly contract plan offered at this level (but 300 minutes for $29.99)
    200 anytime minutes with Tracfone:
  • $39.99 with no contract and 90 days of service
  • No monthly contract plan offered at this level (but 150 minutes for $29.99 per month)
Continue reading the analysis on page two... Learn about all of the prepaid wireless plans.
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