Prepaid vs Contract Cell Phone Service

If you are on the market for a new wireless plan you may be wondering if a prepaid or contract plan is the best option for you.

There are a few things to take into consideration before you make your final decision.

Pros of Prepaid

There are many good points about selecting a prepaid or “pay-as-you-go” wireless plan.

No Credit Checks! Most carriers will ask for your social security number and then run a credit check on you before allowing you to set up an account with them. If your credit score is below what they think is acceptable you will be asked for a deposit. The deposits, depending on your credit score, can be as low as $100 or as high as $1500. There are no deposits required for a prepaid plan.
No Surprise Bills! You will never have any surprises at the end of the billing cycle! Always knowing exactly how much you can afford to spend on your mobile phone plan and knowing that you cannot go over that amount is a huge relief.
No Contracts! You are not tied to a contract; so if, at any point, you want to cancel your account or switch to another carrier you will be able to without the need to pay a huge penalty.
Pros of Contract

A contract with a carrier locks you into a specific term with them; most commonly 12 or 24 months. There are several benefits to signing a contract with a carrier.

Free Phones When you sign a 1 or 2 year contract you can often get a free or at least heavily discounted phone from your carrier! This can allow you to own a much nicer phone, one that is capable of accessing the internet, and email.
Free In-Network Calls Most carriers will let you call friends or family for free if they are on the same network as you are. Those that don’t let you do free in-network calls will often, instead, let you have free calls to a specific number of your contacts.
Cheaper If you stay within your block of minutes per month you will find that you have a much cheaper rate per call than you do with a prepaid plan.
Cons of Prepaid

Cost Per Minute & Text While you will always know how much you’re spending on your prepaid phone, your cost per minute and cost per text message is much higher than it is on a contract plan.
Limited Selection With a prepaid contract you are very limited to the type of phone you can pick. You might be able to get a camera phone, but you are not likely to get a phone that you can use to access the internet or check your emails.
Roaming If you plan on leaving your home area you might find that you are limited in where you actually have roaming coverage with your prepaid phone.
Cons of Contract

Credit Check Before you sign a contract with your carrier they are going to ask you for your social security number so that they can perform a credit check. If you have bad credit you may either be denied service with them or asked to pay a large deposit before they will give you service.
Breaking The Contract If are still within your contract and you move to another area or just want to switch to another carrier you will be asked to pay a contract termination fee. This fee can be pro-rated to the number of months left on the contract or it could be a large fixed fee of over $250.
Upgrade Phone If you break your phone or want to just upgrade it you will find that the carrier will either ask you to sign a new contract or they will charge you full price on the new replacement phone.
Making Changes If you make any changes to your plan your carrier could see this as automatically renewing your contract, locking you in for another two years.
There are good and bad points to both prepaid and contract; you just need to decide which of the two options best suit your lifestyle and most importantly your budget!

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