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Ever wondered how prepaid cell phone service works? Here is the definitive guide to prepaid cell phones.

Prepaid plans can be absolutely confusing since the carriers have so many different types of plans, however they are really easy to understand once you understand a few key concepts.

Prepaid Vs. Contract

Prepaid plans differ significantly from contract plans.

• Prepaid Plans: you purchase your minutes before you use them.
• Contract Plans: you pay for your minutes after you use them.

Contract Plan Basics:

• Also called as post paid plans.
• You get a monthly bill for the minutes you use.
• Since you get a monthly bill, signing up for a post paid plan requires a thorough credit check and a contract with the cell phone company. The contract varies depending on your agreed upon minutes as well as your over the limit minutes which can sometimes cost you a lot of money if you’re not careful.

Prepaid Plan Basics:

• No bill, no credit check and no contract.
• It’s as simple as paying for the minutes before you consume them. Read more to find out just how beneficial prepaid plans can be for you.

Benefits of Prepaid Plans

Prepaid Plans are Cheaper
Prepaid plans can be MUCH cheaper than traditional contract plans. At one time they were more expensive, but a few years ago prepaid rates started coming down. Now they are cheaper than contract plans. For example, Straight Talk offers a 1000 minutes monthly plan for $30. Verizon offers a comparable contract plan with 900 minutes for $59.99. (That doesn’t even include the taxes and fees which will add an extra $15 – $20.) So Straight Talk prepaid service costs HALF as much as a comparable contract plan. Why do people still sign up for contract plans?

No Contracts, No Credit Checks
Traditional cell phone plans charge you for minutes after you use them. This is why they require a credit check and they make you sign a contract – to ensure that you pay your bill. If you don’t pay your bill, then they can report you to the credit agencies and ruin your credit. Also, if you try to leave a traditional contract plan before the end of your contract, the cell phone company will charge you a huge termination fee, sometimes as high as $300. If you don’t pay that then they report you to the credit agencies which will ruin your credit.

Prepaid cell phone plans don’t require you to sign a contract. There’s no credit check and you don’t need a contract since you pay for your minutes upfront, before you use them. If you use up your minutes before the end of your activation period, then you simply buy more – or not, if you don’t want to. You don’t have to buy more minutes. You can let your prepaid service lapse. You could also switch companies just as easily.

No Hidden Fees
With traditional contract plans, they publish one price, but when you get your bill you find it’s more than you were quoted. They tack on all kinds of obscure taxes and fees that typically add an extra $15 to $20 to your bill.

With prepaid plans, there are NO hidden fees. When MetroPCS advertises $40 unlimited service, you’ll pay $40 exactly. The only extra amount you’ll pay is if you purchase your minutes at a local retail store, in which case you’ll pay state and local sales tax on the purchase (which only adds a couple of extra dollars on the price).

Privacy
Prepaid cell phones offer privacy. We all know that today, cell phones have become personal tracking devices. Your location is tracked by the cell phone company. Your conversations are recorded. They even have the ability to turn on the phone’s microphone, even when the phone is off, and listen in on any conversations in the room.

Traditional cell phone plans require a credit check. To do a credit check they require one vital piece of information – your Social Security number. Once you purchase a traditional cell phone plan, your Social Security number, and therefore your identity, is tied to that phone. Any information that is collected from that phone is tied directly to your identity.

Prepaid cell phones, on the other hand, don’t require a credit check. You won’t be asked for your Social Security number to activate your plan. Most don’t even require your name. Your identity is not tied to the phone, so you can enjoy greater privacy with prepaid cell phones.

Many Ways to Pay for your Prepaid Cell Phones

Buy a Card
Most prepaid companies offer their minutes for sale on phone cards. You can purchase these cards at many retail locations like grocery stores, convenience stores, or big box retailers like Target and Walmart.

Pay Online
Many companies offer an online payment option. You’ll have to register with their website. When you need to purchase minutes, just go to that company’s site and pick out the amount of minutes you need and then pay with a credit card.

Automatic Billing
The majority of prepaid companies offer an automatic billing option. This is typically only available for monthly plans. You’ll have to set up this option and register a credit card. Every month, the company will automatically charge your credit card for the amount that you set up. This is the most convenient option, since you set it up once and don’t have to think about it. This is a great option if you know you’ll use the same amount of minutes every month.

So now you’re ready to switch to a prepaid cell phone let’s check out the different Prepaid Plans.

Types of Prepaid Plans

There are generally two types of prepaid cell phone plans: pay as you go plans and monthly plans. The difference in these two types of plans is the activation period.

Activation period -the amount of time you have before the minutes you purchase expire and your phone is turned off. You keep your phone activated by simply purchasing more minutes (airtime) at the end of the activation period. If you let your activation lapse, then many companies will give your phone number to someone else. There are generally no fees for letting your service lapse or reactivating your phone, however if you want to continue using your phone number and avoid the hassle of reactivating the plan, then simply keep your phone activated.

So the difference in the two types of prepaid plans is the length of the activation period.

Monthly plans are exactly what you think they are – plans with a monthly activation period. You purchase an amount of minutes, anywhere from say 100 minutes to unlimited minutes, and you can use those minutes for 30 days. At the end of 30 days they expire and you’ll have to buy more minutes to keep your phone activated.

Pay as you go plans are slightly different. They have varying activation periods. The typical activation period of a pay as you go plan is 90 days. You purchase a number of minutes, which again can be any number from 60 minutes to 1500 minutes, and then you have 90 days to use them.

Activation periods can vary, though. Activation periods can vary from as little as 30 days, all the way up to a year. Many times if you purchase a larger block of minutes, the plans come with longer activation periods. For example, TracFone offers 30 minutes of airtime that lasts for 30 days. Their largest block of airtime is a 1500 minute card which is good for 365 days. It really depends on the company and the variety of options that they offer.

Running Out of Minutes Before The End of the Activation Period:
For example, you purchased 500 minutes that were good for 30 days, but you used up those minutes in 20 days, then you have two options to keep your phone activated.

1. Buy more minutes so that you can continue to make calls. Your phone’s activation period resets the day you add the minutes.
2. Wait until the end of the 30 days and then purchase more minutes to keep your phone activated. Of course you won’t be able to use your phone until you add more minutes, but the plan won’t expire.

How to Get Started with Prepaid Cell Phones

1. Check out the rest of our site. When you find a plan that fits your budget and suits your needs, then click on the link to go directly to that cell phone company’s website. You can buy phones and minutes on their website.
2. Just a quick note, you’ll have to buy a new phone to start prepaid phone service. The cell phone companies don’t allow you to use your old contract phone with prepaid service, so be prepared for that.

How to use this site:
Here are 3 ways to compare prepaid cell phone plans:

1. Compare Per Minute Pricing. When you know how many minutes of airtime a month you use, then check out these comparisons of 200, 500, 1000, and unlimited minutes plans. We’ve gone through every cell phone provider’s plans to see how much they charge at each of those levels.
2. The Best Plans. If you have a certain use in mind for your cell phone, for example you need a cell phone for emergency use only, then check out the Best Plans section.
3. Compare Individual Plans. If you have a particular cell phone company in mind, check out our detailed reviews of each company.

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If you are shopping for a prepaid cell phone plan, the enormous variety of plans can be absolutely confusing. Prepaid cell phones offer some clear advantages over traditional contract plans.

• Prepaid cell phone plans don’t require credit checks
• You don’t have to sign a contract
• They can be significantly cheaper than traditional cell phone plans.

Unfortunately, since every prepaid cell phone provider structures their pricing differently, comparing prepaid cell phone plans can be overwhelming.

When comparing prepaid cell phones you need to look at one thing – the activation period.

The activation period is the amount of time that the minutes you purchase are useable. Your minutes expire at the end of the activation period.

If you take a step back from the details of these plans and look at the big picture, you’ll find that all prepaid cell phone plans fall into two general categories: Pay As You Go plans and Monthly plans.

• Pay as you go plans have varying activation periods (from 30 days to 1 year).
• Monthly plans expire after a 30 day period.

When you read the reviews of prepaid cell phone plans keep these two pricing structures in mind.

Pay As You Go

Pay as you go plans offer varying activation periods.

These can be the most flexible plans, but unfortunately pay as you go plans can also be the most confusing for consumers. The basic principle is that you purchase a phone card and you get to use the minutes for the amount of time attached to that card. The average activation period is 90 days, but you can purchase cards that have more or less time.

Minutes expire at the end of the activation period. If you use up the minutes before the activation period ends, you can simply purchase more minutes and your activation period starts over. Many companies offer longer activation periods if you buy a larger number of minutes.

The standard activation period is 90 days, but many companies offer more or even less time periods. Most companies offer activation periods of 30, 60, 90 or 180 days. A few companies even offer a daily plan, while a few companies offer a yearly activation period. TracFone offers a separate card (without any minutes attached) that will extend your activation period out one full year.

Monthly Plans

This is the simplest of options. With monthly plans your minutes expire at the end of 30 days.

You buy a set amount of minutes and they expire 30 days from the time you activate them. Of course you are not locked into that 30 day period. If you use up your minutes before the time period, simply charge your phone with another card. For example, if you bought a monthly card that had 1000 minutes, but you used those minutes up in 20 days, just purchase another card and charge your phone with those minutes. Your 30 day activation period resets when you charge your account with the new card.

Like the pay as you go plans, you can purchase minutes in varying amounts. Plans are typically offered in 200, 500, and 1000 minute options. Most providers also offer an unlimited monthly plan which generally provides you with unlimited talk, unlimited text, and unlimited web access. These unlimited plans can be significantly cheaper than a contract plan.

Conclusion

Whether you choose a pay as you go option or a monthly plan, prepaid cell phones give you the flexibility to tailor you cell phone budget to the amount of minutes you use. You can increase or decrease the amount of minutes you purchase based on how many minutes you actually use.

So what are the advantages of a pay as you go plan vs. a monthly plan?

Both types of plans offer varying amounts of airtime from 60 up to 1500 minutes. The major difference though is the time component – the activation period. Monthly plans have a 30 day activation period while pay as you go plans have activation periods anywhere from 30 to 365 days. So, with that in mind, here are the benefits of each type of plan:

• Pay As You Go. If you are an infrequent cell phone user, you can use the longer activation periods of pay as you go plans to your advantage. Pay as you go plans make sense for people that use their cell phones occasionally. If you need a cell phone for emergency use only, or if you go long periods of time without using your cell phone, say a month or longer, then pay as you go plans will make sense for you. By having a longer activation period, you can keep your cell phone activated between the times that you use it. You could theoretically use a monthly plan for the same purpose, but many cell phone companies will drop your phone number if you don’t keep your phone activated.
• Monthly. If you use your cell phone consistently month in and month out, then go with a monthly plan. Even if you only use a few minutes a month, if you are sure you are going to use your cell phone, go with the monthly plan. Monthly plans are offered in varying minute packages so you can tailor your budget to your usage. Also, if you use a LOT of minutes every month, then you’ll want to go with an unlimited monthly plan. The unlimited plans offered by prepaid cell phone companies are significantly cheaper than almost any contract plan.

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What is the best unlimited plan? Many prepaid cell phone providers are now offering 30 day unlimited minutes plans. The plans typically offer unlimited talk, unlimited text, and unlimited web access for 30 days.

Unlimited minutes plans are ideal for cell phone power users – those people that use more than 1000 minutes a month. Many times these plans are far cheaper than traditional contract plans that might only offer 500 minutes. Here are two of the cheapest unlimited airtime plans that I consider “the best”.

MetroPCS

MetroPCS offers the cheapest unlimited prepaid plan in the industry at $40. The drawback to MetroPCS is their coverage. As the name implies, MetroPCS was designed for metropolitan areas and large cities. The coverage does not extend out into rural areas. If you live in a large city and don’t plan to use your cell phone outside of metropolitan areas, then the MetroPCS unlimited plan is the best for you. Check out the MetroPCS website at www.metropcs.com

Straight Talk

Straight Talk’s unlimited prepaid cell phone plan is $45. It’s the second cheapest unlimited prepaid plan in the country. While it is slightly more expensive than MetroPCS, the coverage is far superior. Straight Talk uses the Verizon network which has the best coverage of any cell phone network in the country. Your Straight Talk phone will work virtually everywhere. If you plan to use your phone in rural areas then Straight Talk’s unlimited plan is the best for you. Check out the Straight Talk website at www.straighttalk.com

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What is the Best Emergency Cell Phone Plan?
One of the main reasons people purchase a cell phone is so that they can have one for emergency situations. Some people don’t need a full time cell phone. Here are some situations where you might need a cheap cell phone, one that you’re only going to use in an emergency:

• Maybe you just need a cell phone to stick in the glove compartment of your car in case it breaks down or you get stranded.
• Maybe you’re a senior who needs to carry a phone around for emergency situations.
• If you’re a parent, you might need a cheap cell phone to throw in your child’s backpack, in case they need a ride home from school or practice.

Unfortunately, most cell phone plans from the major providers are very expensive and require lengthy contracts. Who wants to pay $50 or more a month just to keep a phone in their glove box that they only use for emergencies?

Fortunately, prepaid cell phone plans are made for this situation. With prepaid plans you’re not locked into a long contract. The other benefit of prepaid phones is that many of the carriers offer really cheap plans with a small number of minutes (for example 60 or 100 minute phone cards). These minutes usually stay active for much longer than a month.

One other benefit of prepaid cell phone plans is that many companies offer low cost phones. You don’t need a fancy phone with a bunch of bells and whistles just for an emergency situation. All you need is a phone that will make calls and possibly text. Many prepaid cell phone providers offer basic, low cost phone models sometimes as cheap as $10.

The Ideal Emergency Cell Phone Plan
So the ideal emergency phone plan would:
1) offer the cheapest no-frills phone on the market and
2) offer an inexpensive service plan with a small number of minutes.

TracFone has a phone and a plan that fits both of those requirements.

TracFone sells the cheapest phone in the industry for $9.99. It really is a no-frills phone, but if you are looking for an emergency phone, one that you can just stick in the glove box of your car and forget about, then the bottom of the line TracFone is exactly what you are looking for.

The cheapest airtime card that you can purchase from TracFone is $20 which gives you 60 minutes of airtime. Sixty minutes of airtime may be a minuscule amount for the average cell phone user, but in an emergency situation it is certainly enough to call a tow truck and to resolve any roadside emergencies.

The minutes on most TracFone service plans last for 90 days. So, every three months you’ll have to refill your phone to keep it active. A years worth of cell phone service is only $80 ($80 for four 90 day airtime cards).

So here’s the math:

(1) TracFone Cell Phone = $9.99
(4) 90 day service cards = $80
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1 year + 1 phone = $89.99 Total

So check out TracFone’s prepaid plans for the best emergency cell phone in the country.

Website: Visit the TracFone website.

Photo Credit: daveynin