Is Prepaid Right For You? Do The Math!
A recent comment on my wireless service in Indonesia post along with a conversation I had with someone in our local Office Depot reminded me to re-examine the whole prepaid versus contract situation. I tried to come up with simple guidelines I could articulate to someone. What I came up with on the spot was not entirely accurate, but it was close. This post will hopefully be more accurate.
Consider the following facts about your typical $40/mo 2-year contract plan with the major U.S. mobile network operators:
- 450 “anytime” minutes included
- Night/weekend minutes are free
- Mobile-to-mobile (calls to mobiles on the same provider) are also free
- Typical cost with taxes and made-up fees: about $45
For the purposes of comparison, let’s assume you only use 450 minutes total per month, whether those minutes fall under one of the “free” buckets or not. At $45/mo, you’re essentially paying $0.10 a minute for service. If you use less minutes overall, then your effective per-minute rate is higher. You might be able to use more than 450 minutes a month thanks to the “free” nights/weekend and/or mobile-to-mobile, making your per-minute usage lower.
If you use less than 450 minutes a month–and I’d wager a lot of people are in this category–you are far better off with a prepaid plan. Prepaid minutes can be had for $0.10 a minute, or less if you shop around. I can get my minutes on T-Mobile Prepaid for about $0.094 a minute, buying in chunks of 1000 minutes. If you’re willing to venture into the smaller, less known MVNOs, you may be able to do it even cheaper.
This only covers voice. The only reasons you might consider a conventional postpaid plan are:
- You make heavy use of data. Prepaid data at an affordable price doesn’t exist, except with one CDMA-based MVNO that a reader swears by: STi Mobile.
- You use lots of text messages. Prepaid text messaging prices aren’t exactly cheap, in volume at least. Unlimited text messaging can be had for $10-$20, depending on carrier.
- You consistently use more than 450 voice minutes a month.
Of the major carriers, I tend to recommend T-Mobile prepaid service. It is by far the simplest of the prepaid plans out there. The minutes you buy last for a year after you buy $100 worth, and are competitively priced. Verizon and AT&T make their prepaid choices way too complicated. Even the sales reps get confused. Sprint doesn’t directly offer prepaid service, but a number of MVNOs that use Sprint such as Boost Mobile and Virgin Mobile are available.
Even if you consider the cost of buying phone outright versus getting it free with a 2-year contract, is prepaid right for you? Do the math and find out for yourself! Why pay each month for minutes you don’t use?
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Tags: at&t. t-mobile, mobile network operators, prepaid, sprint, verizon wireless Fnord
Comment by Markus Goebel
I did the same math and use prepaid for voice and data for more tha 1 year now. My monthly costs are about 8 dollars in Germany, although I am a heavy data user from cell phone.
Comment by PhoneBoy
I wish we could get prepaid data here that cheap.
Comment by Markus Göbel
€0.24 per MB + €0.09 per minute.
Comment by PhoneBoy
That’s still kind of pricey, especially considering we can get unlimited data plans for our cell phones for $20 on a contract.
Comment by spg
i would like to recommended that for voice only prepaid in USA page plus only costs 5.5 cents per minute if you buy at least $80 every 120 days in airtime; and they will activate any unlocked CDMA phone. also the customer service is outstanding; they usually answer the phone on the first ring and they actually no what they are talking about.
Comment by PhoneBoy
@spg $80 every 4 months is what that works out to, or $20 a month. Still too rich for my blood, unless it includes data service.
Comment by spg
but for a heavy user that still wants prepaid it is an option than can compete against some of the heavy usage contract options. a lot of people(the majority) do not use a cell phone for anything other than voice. for me its the best option since my usage pattern is something like 100 to 1000 minutes a month. i never pay for minutes that i do not use and never pay overages. like most prepaid option everything rolls over each payment. i would agree that if you spend less than $240 per year than t-mobile the best option. but if your spend is closer to $500 per year(like mine) you could cut your outlay substantially by switching to page plus. for $320/year you get 5600 minutes with page plus versus 3200 with t-mobile.
Comment by Markus Goebel
A secret of prepaid is to be a heavy data user without using much data. Downloading only the first 5 KB of emails is enough to read them. Websites should be accessed through Opera mini or Google Reader mobile. They strip out unnecessar HTML Code and advertising and sample down images.
Also use Wifi wherever you can! With Fring you can send 200 chat messages for the price of one SMS. VoIP callthrough makes every international call local. That’s how you save.
Comment by PhoneBoy
@spg the page plus deal would be good for heavy talkers not wanting to go the contract route. I might recharge my wife’s phone 3 times in a 2 year period, though. Even my own usage isn’t that great, but someone else pays my bills.
@Marcus: WiFi is a good choice for sure, particularly when you’re paying that much per megabyte. Using those other tools are also a good idea.
Comment by spg
@markus. having lived both in europe and usa i can say that the appetite for data services is very different. here in the US i see two main groups. there are bossiness oriented people who are interested in little more than email and other communications services. the other group is really only interested in entertainment oriented streaming data type stuff like music, videos(you tube), etc. this second group can really only be satisfied with unlimited data. any metering would result in a massive bill. actually the second group also has the dilemma that everything they want to use there data plan for violates there terms of there agreement with the carrier; but they still manage to do it.
well there is also a third group and one that i believe will dominate data usage of cell network in the future. that tethering of laptops or use of separate dongle for laptop data. but this really has to become unlimited and without any fair use restriction before it will catch on really big.
Comment by janni
Picking out aprepaid cell phone plan is a lot like slicing your way through a tangled jungle with a machete. Many consumer advocates accuse the big wireless players (such as Verizon, Cingular, and T-Mobile) of intentionally obfuscating their plans to cash in on the ignorance of customers. That said, the reality is that all companies offer tiered deals, and it is therefore critical to analyze your calling behavior prior to signing up for a prepaid package.
Comment by phonecard
What about mobile internet?