A prepaid phone plan, sometimes called a pay-as-you-go plan, is one of the best ways to save money on cellular service. You only pay for the minutes you use, and you're not tied in to a lengthy service contract.
Using a prepaid plan is a lot like using a calling card, albeit one that comes with its own phone. You select the prepaid service you'd like to use and then purchase one of their phones. You then activate the phone and pay to put a certain amount of calling time on it. You can make and receive calls until your calling time runs out, at which time you'll have to reload the phone to use it again.
It's as simple as that.
But a prepaid plan isn't for everyone. Here are several reasons why you may want to try a prepaid plan, and several more reasons why you may want another option.
Price: You only pay for the minutes you use, so a prepaid plan can save you a lot of money, especially if you're not a frequent cell phone user.
No Credit Check: Applying for a two-year service contract with many carriers means you're required to submit to -- and pass -- a credit check. If your credit score is blemished, you may not qualify, so a prepaid plan can be a better option.
Choice: You can find prepaid plans from all of the nationwide cellular carriers, and you can find additional prepaid service options from smaller and regional carriers, too.
Freedom: You're not tied in to a lengthy service contract, so you can change carriers or phones at any time.
Control: If you're buying a phone for someone else -- like a child -- to use, a prepaid plan puts you in control. They can only use as many minutes as you've purchased, so you won't be faced with an astronomical bill after a month of way-too-many calls and texts.
Price: Yes, the overall price you pay for using a prepaid phone is likely to be less than you'd pay for using a typical "post-paid" cell phone, but the per-minute rate is likely to be higher. If you're going to be using a lot of minutes on your prepaid phone, shop around for the carrier with the best rate.
Time Limits: All those calling minutes you've purchased don't last forever. Minutes usually are good for anywhere from 30 to 90 days, though some carriers will let you keep them for as long as a year, Whatever the deadline, remember that if you don't use your minutes within that time, they're gone for good. Find out how long your minutes will last before loading up your phone.
Choice of Phone: Your choice of cell phones is likely to be limited -- very limited. At this writing, Verizon Wireless, for example, offers only four cell phones that work with the carrier's prepaid plans.
And while the selection of prepaid phones has improved, you're not going to find a prepaid plan that's compatible with many of today's latest and greatest handsets.
Phone Price: You also may pay a bit more for your phone, as carriers tend to offer significant discounts on handsets when you sign a service contract. But you can find decent phones at decent prices if you shop around.
Paying for Extras: If you want to use your prepaid phone for more than just calls, you'll need to spring for the data services you want, too. If you want to send and receive text messages, check e-mail, or surf the Web, you'll need to prepay for a messaging or data plan to take advantage of those features. And remember that the most basic phones available from some of the prepaid carriers may not support Web browsing or e-mail.