Prepaid plans: the basics

What's the benefit of going the prepaid way?
The big advantage of prepaid is that there's little hassle and no commitment. By contrast, if you sign up for a traditional plan with a major cellular carrier, you'll likely sign a contract binding you for a year or more. If you break the contract, you'll have to pay a big penalty. Another plus of prepaid plans is that you won't have to endure a credit check; in some cases, you won't even need a credit card. With Virgin Mobile, for instance, you can walk into a Virgin Megastore, grab a phone with prepaid minutes off the rack, plunk down your cash, and start dialing.

How to use a prepaid plan
To get started with a prepaid plan, you buy a phone and a set amount of service. For some carriers, you pay specifically for a bucket of minutes, ranging from 30 to 1,000; for other carriers, you buy the equivalent of a calling card (say, $25). When you use up your minutes or your calling card, your phone stops working, and you must buy more--thus, avoiding overage charges. You can shop through the carrier's Web site, or you can go to a carrier store or a local retailer and buy your phone and minutes in person. While most carriers have simple plans where you just buy minutes as you need them, others have monthly rates or autopay options where your credit or ATM card is automatically charged a set dollar amount each month. As you make calls, the per-minute cost is deducted from the monthly amount until you have no more money or time left.

Sounds good--but what's the catch?
While you might like the idea of no hassle or commitment, you'll pay a price for that convenience. First of all, you'll probably end up spending more per minute over the long run than you would if you signed a contract. This is especially true for anyone who uses a cell phone several hours a week. While you can get as low as 10 cents a minute with some prepaid carriers, there are often additional costs such as daily access fees (sometimes as much as $1 a day) or minutes that expire after just 30 days. On the equipment side, prepaid-only carriers typically don't have the latest bleeding-edge phones, and the majors will limit your handset choices. While some carriers are starting to break the trend (for example, the sleek Motorola Razr V3 offered by AT&T and T-Mobile, as well as Verizon's prepay Razr V3c), others offer little more than budget models. So if you're dying to get a smart phone such as the Treo 700w, you'll have to sign a contract to do so or pay a premium for an unlocked version. Finally, with some prepaid carriers, you won't be able to port your current phone number over to a prepaid phone--and you can't take your prepaid phone number with you to another carrier. Be sure to check first.

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