The dilemma:
It's that time again. Your cell phone contract is about to end and your cell phone is on its last leg: it barely holds a charge and you can only use it on speaker phone. I guess you have no other choice but to start a new contract so we can get a new phone, right?
Wrong!
You don't need to renew your contract, or even sign one in the first place. Prepaid Cell phone service has now reached into mainstream cell provider networks like Verizon, AT&T, T-mobile and more. You're not stuck with a feature-less tracphone if you want to reduce your cell phone bill.
But does it make sense for you? It might, it mostly depends on how you use your cell phone. My family started with one Verizon cell phone - my wife's - and it sees fair use (about 500 minutes per month). You'll want to know your usage before you make your decision.
Pre-paid basics:
You prepay for you cell phone service by adding credit to your account. The amount you add expires after some time after which you must add more credit to carry over the balance and keep your number active.
Most prepaid cell services have differing plans that you can choose based on your usage:
1) pay per day - charges you a fixed price ($1, $2, $3) only on the day you use it with lower per-minute, per-text charges or even free or unlimited minutes
2) pay per minute - its that easy: pay per minute used or pay per text sent/received.
3) pay per month - like a contact plan, but without the contract. You get a defined plan and pay each month, with no commitment and sometimes at a lower cost.
Sometimes you can change the plan on the go, if you don't like the plan you've selected.
When I was looking for a prepaid phone, I found that Walmart has a 15 day return policy on Prepaid Cell Phones. So you can try it out for two weeks and see if it works for you, then return the phone if it doesn't. You can try out different carriers, different plans, different phones - you'd only be out the credit you added to your account - instead of a large cancellation fee.
Usage Examples:
Here are a few ways that I've been able to use prepaid cell phones to my advantage.
1) Temporary Phone service - Business Trip
When I was going away on a business trip, my company ran out of temporary cell phones. If I was going to contact my family while I was away those 5 days, I was going to have to go prepaid. I picked up a $15 Verizon prepaid phone. It came with $10 in credit and I chose a $1 per day plan which would give me unlimited minutes to our verizon contract phone each day I used it. The credit would last for 30 days, which was fine because I needed it for much less time.
Over the 5 days I was away, I racked up about 200 minutes talking to my family. This was all accounted for with the $10 credit that came with the phone. So for $15 I got a phone, a charger, a wired headset and 200 minutes of talk time ( 7.5 cents per minute) - MUCH better than a tracphone plan and without the gimmicks.
After the 30 days, my credit and my phone number expired and I gave the phone to my nephew because he thought it was cool - he lost it and I though nothing of it.
2) Temporary Phone service - Seeking new employment
Fast forward two years. I hate my job. Layoffs keep coming. I have to get out of this place! But, how can I make myself available to prospective employers?
I don't want to use my work phone number, I'll be at work all day so I don't want to give out my home phone and I don't want my wife answering a call from a potential employer if I give out her cell phone number. Time to buy another prepaid cell phone! This time verizon was the ONLY choice due to the remote location at work.
I bought a $20 phone, activated my account, added my prepaid number to my resumes, and started sending them out.
Two months later, the calls started coming in. I had 12 interviews and all of the initial phone contacts happened while I was at work! I even had several interviews over the prepaid phone at work in abandoned conference rooms.
After 7 months, I finally landed a great job amounting to an 18% raise, after paying a total of $95 of cell phone service (less than $15 / month). After my last credits expired, the prepaid phone went on the shelf with the rest of the old cell phones.
3) Low-Cost or No-Cost Contract Phone Replacement
After taking the new job and moving to a new apartment a year went by. Our cell phone contract ended and our cell phone's speaker broke. We had to activate the speakerphone for every call to hear the conversation.
Verizon would have gave us a new 'free' basic phone or a 'discounted' feature phone if we signed a new 2 yr contract and paid a $30 upgrade fee. That wasn't appealing to us.
I remembered that old prepaid phone sitting on the shelf. I did some googling and found the verizon activation code. I typed it in, entered my phone number and it suddenly became our main phone and its still going strong.
If you're stuck with a phone that you don't like or that doesn't work right and you don't want to have to sign a contract to get a discount on a new phone, buying a prepaid phone will get you a discount.
If you're using Verizon, you'll have to activate your phone by entering the activation code on the keypad or you can activate online.
If you using T-mobile or AT&T you have a SIM card in your phone that holds you basic info, so just pop the SIM card in the prepaid phone and it will work.
4) Low-use cell phone for low $ per month
The new job was going great and I was put in a position that 'required' me to carry around a backberry. I hated that phone! The company allowed 500 minutes of personal use, but I never gave family or friends my business number. Occasionally, my wife would call on the way home from work to ask me to grab something from the store and that was handy.
The company started cutting costs and with it went the Blackberry (Thank goodness!). But now my wife couldn't contact me on the way home. I started researching prepaid phone providers and chose T-mobile's per-minute plan based on:
- lowest carry over cost - $10 credit lasts for 3 months
- lowest text message cost - .10 per SMS, .25 per SMS
I purchased a $20 T-mobile basic phone (the most feature-less phone I've ever had ) and 160 minutes for $30, which lasted for three months. I used 27 minutes in the first three months, then added $10, getting an additional 30 minutes for the next three months. I used 44 minutes over the next three months.
While that may equate to 55 cents a minute, that 55 cents a minute over six months led to a total cost of $10 per month. Try getting a cell phone plan for that cheap! I'm on track to add $10 carryovers for the next year, which will bring the cell phone cost to less than $7 a month - even if you include the initial price of the phone. That is well worth the convenience!
5) Wi-Fi only smartphone (SIM-based phones only, AFAIK)
I thought the ultimate solution was to use a voice-text-only cell phone, buy a used smartphone and use the smartphone's bluetooth to act as a handset for the basic phone.
Then a co-worker, who had worked previously for a cell-phone company, came up with a better plan. I slid my voice-and-text-only SIM card from my basic phone into his contract Smartphone. I used the phone to dial his desk phone, it worked! He called my phone number with his desk phone and it rang his smartphone! Finally, we dialed voicemail from his smartphone and my mailbox answered. We tried loading some data and it failed since the SIM card had no data plan. There it was - a WiFi only smartphone that used my less than $10 a month prepaid plan.
Having a prepaid mini-SIM card, I could slide it into a T-Mobile or AT&T smartphone (even an iPhone) and get a WiFi-only smart phone. I could get a used one, but the affordable ones were all two years old, breaking or had bad batteries and no wattanty. A new smartphone without a plan ran into the $300 range. There had to be something better!
The answer was again - another prepaid phone! I compared specs on T-mobile and AT&Ts entry-level Prepaid smartphones. They averaged about $85 and had comparable Hardware (1 GHz processors, 500MB RAM). In the end I bought a Tmobile Prism II (available at Walmart for $70). I took it home, set the prepaid smartphone SIM card and its $50 a month plan aside and slid in my voice-and-text-only SIM card.
The phone is a little slow- which was not a surprise- but I can be patient - especially when I'm saving $50 a month in mobile data charges! I now carry a less than $10 per month, WiFi-only smartphone with most of it functions available at any given time - it's the best of both worlds!
If I ever need to access mobile data (like a cross-country road trip), all I have to do is activate the prepaid SIM card that came with the smart phone and use it only when I need it.
My work buddy completed his contract on his smartphone and then got a prepaid voice-only prepapid SIM card. He added $100 to his account for the next year (1000 minutes). Much better than his $80 per month mobile data plan.
You may find someone with a smartphone laying around that would give it to you for free...
6) Emergency phone or Young Child phone
Sometimes a cell phone would be handy for an emergency (thrown in a backpack or glovebox) or to get you in touch with your young child if you'll be late picking him up from school or for him to call if he gets lost.
Buying a basic phone from T-mobile for $20 is just the thing you need. Remember that low carry-over cost I mentioned earlier? For $10 you'll get 30 minutes of emergency talk for three months. If you hardly ever use it, after a year, you would have almost two hours of talk stashed up, and would have spent $60 dollars total (including the phone) for you to get in touch with them. That's $5 per month! ($3 per month if you already have the phone)
A great feature of the current T-mobile basic prepaid phone is that you can only allow it to connect to certain numbers, so you can control who they can call and who can call them. A great option for kids.
7) Lower your bills over a traditional plan
One nice thing about a prepaid plan is that the only tax you pay is sales tax. That alone could save you several dollars a month over traditional cell service and all their extra taxes and fees.
When we looked at our cell phone usage, we were paying about $50 a month for about 500 minutes of use - which is around ten cents a minute. This puts us in prepaid phone territory. We found a plan on Tmobile's website for $30 a month which provides 1000 minutes of talk and text. We're going to watch our bill over the next few months and then look into this option. There may be an option out there for you, too!
In a few months, my wife may be sporting her own WiFi-only Prepaid Smartphone, financed by our $20/month savings on cell service...
