holding cell phone researching cell phone plans

Prepaid vs. No Contract: Which Cell Phone Plan is Best for You?

Before buying a new cell phone, there are a lot of things to consider. One of the most important decisions is how to pay for your phone, with the most common options being a prepaid phone or a no contract phone. These two options can be confusingly similar, so here is a look at the pros and cons of each.

Prepaid Phones

A prepaid phone is exactly what it sounds like. Whenever you need more texts, minutes, or data for your phone you simply buy a recharge card and load your replenished supply into your phone. Prepaid phone plans create an easy phone experience since you only pay for what you use.

Pros of Prepaid Phones:

No monthly bill
Since you will only be paying for exactly what you need and when you need it, there is no monthly bill to have to factor into your finances. Simply pick up a recharge card when you need one.

Pay for what you need
With plans that require you to pay for a set amount of service every month, you may be paying for too much. What is the point of paying for unlimited minutes if you barely use 200?

Save money
If you are conservative with your phone, then having a prepaid phone could save you a lot of money. Paying for less and not being shackled to monthly payments means you will be paying less overall in the long run and therefore keep more money in your pockets.

Cons of Prepaid Phones:

Up front costs
With prepaid phones, you will be required to pay the entire price of your device up front before you can pay to load it with minutes or data. This cost can often be hefty with today’s phone prices.

Phone selection
Using a prepaid phone restricts your options for what device you can use. Many of today’s newest devices will only be offered through contracted plans or larger payment plans.

Expiration dates
Recharge cards may come with an expiration date, which means you only have a specified length of time you will have access to the minutes once they are loaded onto your device. While you are only paying for what you think you will use, if you do not use those minutes, they are basically wasted money.

No Contract Phone Plans

While it seems like no contract and prepaid should be nearly the same type of plan, there are a few important differences. Namely, no contract plans still come with a monthly payment; you simply pay at the beginning of the month and are not tied down into a multi-year contract. For the most part, no contract plans actually function very similarly to contracted plans.

Pros of No Contract Phone Plans:

Lower payments
In comparison to contracted phone plans, no-contract plans will often come with much lower payments and therefore save you money.

More for your money
While you will likely pay more than prepaid plans, no-contract plans will often give you unlimited text and talk with a fair amount of data access for your money.

No termination fees
The biggest difference between a contract and no contract is having a no contract plan will let you avoid things like early termination fees if you decide to change your phone plan.

Cons of No Contract Phone Plans:

Phone cost
Similar to prepaid phones, you will typically have to pay for your device up front. However, some carriers may offer down payments instead of the full payment up front.

Paying when you leave
If your no contract plan allows you to make a down payment on your device, you will be required to pay the remainder of what you owe on the phone if you decide to leave the service.

Higher cost
While you save money in comparison to contract plans, no-contract plans will have larger payments than prepaid phone cards.