The increase in the cost of living is causing many people to look for ways to reduce their spending. Switching to a prepaid phone plan is an easy way to save money while enjoying similar services and features to those offered by a postpaid plan.
If you’re thinking about canceling your contract phone plan, it’s important to consider the advantages and disadvantages of prepaid phone plans before taking the plunge.
In This Article
- How Do Prepaid vs. Contract Phone Plans Differ?
- Benefits of Prepaid Phone Plans
- Downsides of Prepaid Phone Plans
- How to Choose a Prepaid Phone Plan
How Do Prepaid vs. Contract Phone Plans Differ?
Phone plans have many variations beyond your monthly data allowance and coverage network.
Specifically, your cell phone plan will either require a contract or can be a month-to-month prepaid plan with a fixed fee. As with anything in life, there are tradeoffs, and the best option depends on your personal situation.
|Contract Plan||Prepaid Plan|
|Average Monthly Cost Per Line (includes taxes and fees)||$80 to $100||$20 to $50|
|Minimum Commitment Period||Typically two years||No commitment as you pay month-to-month|
|Early Termination Fees||Up to $350||None|
|Device Payment Method||Can pay off over the contract period||Must pay upfront or obtain separate financing|
|Bring Your Own Device||Yes||Yes|
|Best Advantages||Phone financingPotentially cheaper family plansMore reliable data speeds||No hidden fees or taxesMonth-to-month paymentsMore features at a lower cost|
Contract plans can be better if you can’t afford to purchase a phone upfront since the carrier often offers financing.
The table below compares the Visible plan to the entry-level T-Mobile Essentials plan.
Note: This is a sponsored post by Visible. Well Kept Wallet only partner with brands that have a good reputation and that we believe are helpful to our readers. For additional questions, feel free to check out the Visible Terms and Agreement section.
|Monthly Cost (One Line)||$30||$65|
|Taxes and Fees||Included||Extra|
|Activation Fee||$0||$10 SIM Kit|
|Unlimited 5G and 4G LTE||Yes||Yes|
|Unlimited 5G/4G Hotspot||Included||Unlimited 3G with optional high-speed upgrades|
|Talk and Text to Canada and Mexico||Unlimited||Unlimited|
Additionally, postpaid plans give you priority access to the network, which allows you to enjoy the best coverage quality during peak times. Plus, you have more plan options.
While contract phone plans typically cost more, there can be promotions for adding multiple lines at a low cost. You may also be able to qualify for employee discounts.
However, fees, taxes and phone payment charges may not be included in the advertised monthly cost.
Prepaid phone plans let you pay month-to-month, so you’re not locked into a two-year contract and are less likely to encounter hidden fees.
These no-contract cell phone plans are usually cheaper since operators lease excess network capacity from major carriers like Verizon Wireless, AT&T and T-Mobile.
What’s more, some of the major phone networks offer prepaid cell phone plans with attractive features and prices.
For instance, Visible is a subsidiary of Verizon Wireless. It has a prepaid plan that lets you enjoy same coverage at a cheaper cost of $30/mo without the stress of a two-year contract.
Benefits of Prepaid Phone Plans
Here are some of the best advantages of signing up for prepaid phone plans.
Contract-free plans typically don’t offer as much customization as postpaid plans since they’re cheaper. Despite the simplicity, prepaid carriers are more likely to offer add-ons such as a complimentary mobile hotspot.
Better yet, prepaid cell phone plans may even give you free international calls to select countries along with unlimited domestic talk, text and data.
You may not be able to afford these amenities under a contract phone plan, but they could be within your budget if you switch to a discount carrier.
Keep in mind that each prepaid provider has its own unique benefits, so it’s best to compare several options. For example, Visible by Verizon offers unlimited mobile hotspots plus free talk and text in Canada and Mexico.
Prepaid phone plans are almost always cheaper, which is more valuable than ever during inflationary times. You can usually receive a monthly discount by adding multiple lines as well.
The most obvious price difference can be with unlimited plans. It’s not uncommon to pay at least $70 for a single line from a legacy carrier and only $40 monthly from a prepaid service using the same network. Sites like Visible by Verizon offer as low as $30/mo pricing.
Basically, you can receive a similar service at approximately half the cost.
Using our example with Visible, they offer a competitive advantage with their prepaid pricing that is straightforward and includes taxes as well as fees in the advertised price. This is something most companies do not provide.
Enrolling in paperless billing and autopay may also be necessary.
Not having a contract gives you more freedom to switch carriers as your circumstances change. You don’t have to worry about “buyer’s remorse” and finishing out your contract if it’s too expensive to end it early.
Since you pay monthly, you can discontinue service at the end of the month without paying an early termination fee. You can also restart phone service without paying an activation fee if you decide to cancel your service for the months you don’t need it.
This flexibility lets you change to a cheaper plan if you move or need different features at no penalty.
Your only additional fee might be purchasing a SIM card if you switch to a prepaid phone plan.
No Credit Check Required
A credit score is an eligibility factor for contract carriers because they want assurance that you can afford the monthly service fee. Additionally, missing contract payments can hurt your score for several years.
In addition, even if you can afford your phone bill, a hard credit check can result in other negative implications since it appears on your credit history.
Due to the fact that you aren’t signing a contract, prepaid carriers won’t check your credit. Missing payments also won’t hurt your score since the credit bureaus are unaware of your payment history.
If you’re repairing your credit, opting for a contract-free service is an effortless way to keep your credit history clean.
No Overage Fees
Since prepaid phone operators use an all-in pricing model, you don’t have to worry about overage charges if you exceed your monthly talk, text or data allowance.
In today’s world, overage fees usually only apply to data usage as talk and text are generally unlimited.
Legacy carriers are more likely to continue offering standard internet speeds unless you enable overage protection in your account settings. This makes it likely to see an unexpected overage charge at the end of the billing cycle if you’re not monitoring your account.
With prepaid phone plans, you may have the option to upgrade to continue receiving uninterrupted service. The provider might even offer reduced service quality for the remainder of the month, so you will need to use WiFi networks for fast internet access.
Downsides of Prepaid Phone Plans
While prepaid phone plans excel at helping you save money on your monthly phone bill, several drawbacks can impact your finances and service quality.
If you need a new smartphone, you may spend $400 to $1,200 for your desired device.
Prepaid phone companies don’t offer free or discounted phones like contract carriers that recoup the expense over your contract period.
Similar to contract plans, prepaid carriers may offer gift cards to new customers on qualifying phone purchases.
For example, you might be able to get a Google Pixel 6a for $449 through Visible and receive a $200 virtual gift card after completing three monthly service payments when you activate your new phone.
If you have at least four lines, a major carrier’s family plan could be the cheaper option. While a contract still binds you, legacy providers tend to offer better discounts than prepaid carriers.
Along with family plans, primary carriers like Verizon and AT&T may also offer bundle discounts if you have home internet, cable or a landline. It can be challenging to compete with these loyalty offers.
However, prepaid plans usually offer multi-line discounts, so it’s still worth comparing prices to verify you’re getting the best rate.
One of the biggest draws of sites like Visible is that you can get “family plan pricing without the family”. Single line users and multi-line plans all get the same great value.
If you travel abroad regularly or frequently communicate with loved ones outside the United States, postpaid plans are more likely to offer better international service without purchasing add-ons or paying roaming fees.
For example, prepaid service may not offer international roaming, and your phone’s talk, text and internet features may only function when connected to WiFi. However, you can purchase an international SIM card and use a local provider during your trip.
A few prepaid providers offer complimentary international service or optional add-ons in select countries.
One example is Visible, which offers free talk and text in Canada and Mexico using the Verizon network. In comparison, Verizon Wireless customers also get complimentary data in the same countries.
Since prepaid carriers use all-in pricing to prevent hidden fees, you may not be able to call foreign destinations from the United States. Instead, you will need to use free apps like Zoom, Skype or FaceTime to make free international calls.
In most cases, it’s difficult to notice a difference in the service quality between prepaid service and contract phone plans when you use your device directly through the network provider. You can expect reliable and fast data service and voice quality.
Unfortunately, prepaid plans are more prone to data deprioritization at busy times and throttling once you reach your monthly usage limit.
For example, you may receive 5GB or 10GB of high-speed data followed by a reduced speed after exhausting your monthly allowance.
Customers with prepaid plans can also be the first to experience slower data speeds during peak usage periods. Admittedly, contract customers with lower-end plans may also feel the effects of throttling before premium subscribers.
How to Choose a Prepaid Phone Plan
If you are trying to choose a contract-free phone plan that’s affordable and has reliable coverage, these steps can help.
1. Choose a Device
Initially, deciding if you will purchase a new device or bring an existing unlocked device can make the prepaid phone plan comparison process easier.
Knowing your device needs upfront allows you to see how much carriers are charging for your desired Android or Apple phone. Your device cost can be the most significant expense, and finding the best deal makes it easier to choose a carrier.
Also, take the time to compare the latest prepaid phone upgrade offers. You might be able to receive gift cards or discounts on select devices.
By bringing your own device, you also save money by not replacing your phone.
Whether you buy a phone or bring your current one, you can port your phone number for free.
2. Research Coverage and Plans
You’ll want to make sure your potential prepaid cell phone plan provider has coverage in your area before signing up. Most providers offer coverage maps on their websites to verify this.
In addition, most prepaid carriers offer several plans with different data packages and additional features. An unlimited data plan can be your best option if you consume lots of mobile data.
Unlimited plans may sound expensive, but they can be surprisingly affordable.
You may appreciate Visible phone plans.
Here are some key features:
- Unlimited talk, text and data
- 5G data speeds from Verizon (where available)
- Unlimited mobile hotspots (data speeds up to 5Mbps)
- WiFi calling on compatible devices
- Scam Protection blocks unwanted calls
- Calling and texting in Canada and Mexico
If you bring a compatible iPhone XR or XS, you also receive a 15-day free trial to test the Visible network performance against your current provider.
3. Activate Service
Compatible devices can be eligible for eSIM technology to access unlimited talk, text and data in as little as 15 minutes instead of waiting for a physical card to arrive from Visible.
If you receive a physical SIM card instead, it arrives via overnight delivery.
After getting your SIM information, you can activate your prepaid phone plan from the Visible website or mobile app. You will create an account and sign in to begin access to voice, text and data.
The carrier will also transfer your number during the activation process. After the transfer is complete and you’re satisfied with the service, you can cancel your old plan and potentially receive a partial refund for your remaining billing period.
Prepaid plans are easy to switch to, and the benefits are usually well worth the initial effort. Paying half the cost of traditional phone plans without sacrificing coverage quality is the best reason to switch to prepaid plans.
Additionally, prepaid plans give you more freedom and keep you from worrying about hidden fees or rising plan prices. Sites like Visible offer just that.
Ultimately, when it comes to prepaid vs. postpaid plans, prepaid plans offer many benefits that can make switching worthwhile.