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 data you use, and you’re not tied into a lengthy service contract. However, there are some drawbacks worth considering.

Prepaid Rundown

With a prepaid plan you select the service you’d like to use and then purchase one of the phones offered by that service. 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 point you’ll have to reload the phone to use it again.

  • No contract or credit check.

  • Only pay for the data you use.

  • Better parental controls.

  • Have to pay full retail price of phone.

  • Limits on talk, texts, and data can be frustrating.

  • Limited choice of phone.

  • Poor roaming capabilities.

Prepaid plans aren’t for everyone. Here are some reasons why you may want to try a prepaid plan and some reasons why you may not.

Pros

  • Price: You only pay for the data you use, so a prepaid plan can save you money. This is especially true if you mostly use phones for talking and texting, which are often priced separately (and more cheaply) than data plans.No Credit Check: Applying for a two-year service contract with many carriers means you’re required to submit to a credit check. If your credit score is blemished then you may not qualify, so a prepaid plan could be the better option.Freedom: You’re not tied to a lengthy service contract, so you can change carriers or phones any time you want.Control: If you’re buying a phone for someone else, a prepaid plan puts you in control. They can only use as much data as you’ve allotted, so you won’t be faced with any surprise bills. This is a nice option for parents concerned about their kids’ phone usage.

Cons

  • Price: Data rates may be higher with prepaid plans than they were with a contract. You’ll also have to pay for the full retail price of the phone, which with a contract often includes a discount or payment plan.Time Limits: Some data plans come with unlimited talk and text, but those with low or no data options typically impose time limits and restrictions on the number of texts you can send. This can be frustrating if you haven’t budgeted that time accordingly.Limited Roaming: Prepaid plans often have limited roaming capabilities when traveling in other countries. If you do a lot of traveling you may be better offer with a standard service contract.Choice of Phone: Your choice of cell phones is limited with a prepaid plan. Some carriers may only offer a few phones that work with their prepaid options. Some may not even support “smart” features like web browsing or social media.

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