Please! Check out prepaid phones

A new survey released minutes ago concluded what I have been advocating for years: Many consumers should consider prepaid, pay-as-you-go phone plans, instead of the usual contract plans. They could save literally hundreds of dollars per year.

The switchover is something I did for two cell phones in our household earlier this year. Read more about that here and here. The net result is savings of about $800 per year, compared with a family plan through a major contract wireless carrier. I haven’t missed my former plan at all. And I’ve cut my monthly cell phone cost to less than $10. My reception and call quality are actually better. I can use text messaging, Bluetooth wireless headsets and the phone’s camera. (Though, granted, many prepaid phones aren’t that full-featured yet.)

While I’ve been advocating prepaids for a long time – the advice appears in my book “Living Rich by Spending Smart” – I have company. Both Consumer Reports and the Telecommunications Research and Action Center have recently advocated using prepaids.

The survey released Thursday by the New Millennium Research Council found that consumers were making the illogical decision to stay with a contract carrier – where you pay a bill every month for a predetermined number of wireless minutes – because they don’t know any better. It identified several myths that were holding back consumers from making the switch to prepaids. These myths are probably why just 16 percent of cell phone users take advantage of prepaids to save money.

Among the myths:

  • Over half of Americans (51 percent) believe that the following myth is true:”Switching to a prepaid cell phone is expensive because contract-based or postpaid cell phone customers are always under contract and have to pay a cancellation fee whenever they switch carriers.”Only about a third (34 percent) knew that this statement is incorrect.
  • Nearly six out of 10 Americans (59 percent) –including 70 percent of 18-24 year olds –mistakenly believe that prepaid phones “are good only for people who rarely, if ever, use their cell phones.” Less than a third (32 percent) of respondents knew that this is a myth.
  • Americans split on the accuracy of this myth: “A contract-based or postpaid cell phone customer with an ‘unlimited’ calling plan is always going to pay LESS than a prepaid customer who pays by the minute.”
  • More Americans than not mistakenly believe that prepaid phones are only available in “very basic models.”
  • Americans split on the accuracy of this myth: “Prepaid cell phone plans where you pay for the minutes you use always cost MORE per month than contract-based cell phone plans where you pay a monthly fee.”
  • Only half know that it is untrue that “prepaid phones don’t get very good reception and only work in certain places.”
  • Less than half know that it is untrue that “you can’t get voice mail, text or take photos on a prepaid phone.”

Americans with cell phones typically use 262 minutes per month, the survey said. My rule of thumb is that anyone who uses less than 400 minutes on average would probably save money with a prepaid phone.

The NMRC survey did not examine how much money consumers could save with prepaid plans.

Check out prepaid plans from Tracfone.com, Net10.com, T-Mobile.com and VirginMobile.com. They all offer national service and were top-ranked in a recent J.D. Power and Associates customer satisfaction study.

The main hassle with prepaids is that minutes you load onto your phone expire after a certain period (just like minutes on a post-paid plan expire every month.) The more minutes you buy, the longer they live. I’d advocate trying out a prepaid phone, and if you like it, pay for enough minutes so they last for a year. That way, you don’t have to worry about them expiring. When your minutes run low, you just load more minutes onto the phone. You can do that by buying minutes from the phone itself and putting in a credit card number, or buying online or buying a minutes card from a retail store, such as a convenience store, supermarket or drug store.

And yes, you can port your existing phone number to your new prepaid phone.

If you’re looking for painless spending cuts during this recession and you use fewer than 400 minutes per month, switching to prepaids should be at the top of your to-do list.

18 Responses to “Please! Check out prepaid phones”

  1. I just bouth my 12 year old a prepaid cell from Tracfor For $30 the phone came with 400 minutes which should last him several months at least. The phone’s more than he needs, but I thought I’d splurge since it was a b-day pesent. Has camera and reception’s great. I think prepaid is the best way to teach kids the value of money and the responsibilities of having a cell. By limiting their minutes to whatever they can buy with a prepaid card sets boundaries in terms of who or when to call. In a way it also teaches them critical thinking.

  2. i have 1 and i have saved 400 dollors a year with out taking out unlimted talk and messages..

  3. […] turns out that Karp is something of a prepaid phone evangelist. But no wonder! In this piece from last December, he describes the benefits of switching two cell phones in his household to prepaid: The net result […]

  4. […] turns out that Karp is something of a prepaid phone evangelist. But no wonder! In this piece from last December, he describes the benefits of switching two cell phones in his household to prepaid: The net result […]

  5. I am a Prepaid (GO phone user) because I found out I was not using the 300 minutes/month I was getting on a $40 contract. Even if they roll-over to next month, like ATT, what good does it do if you can’t/don’t use them.

    But be careful switching to Pre-Paid if you do not have a land line, standard home phone, or are not a careful and frugal person. The BEST prepaid service, like T-Mobile, the minutes are going to cost you at minimum 10Cents/Minute, and that is if you buy them $100 at a time. And don’t forget ALL calls, long distance or not are charge 10Cents/minute as if they were all long distance. A land line phone cost about 5Cents/Minute, 2Cents if you use a Call Around provider for long distance, Tel3 Advantage for example, and 0Cents/minute for local (excluding your monthly land line cost of course at $20/month minimum.

    Conclusion, if you have a land line and are frugal at using it instead of your more expensive/minute, but more convenient cell phone, then Prepaid is definitely the way to go to save some money. If your cellphone is the only phone you have, then it is not likely you are using less than the 300 ANYTIME minutes/mo the minimum contract payment give you, plus typically FREE phones each year. Don’t forget when calculating how many minutes you are using on your cell phone, the FREE minutes you are using between 7PM and 7AM as well as mobile to mobile. These do not show up on your Cell Minutes used and may be as great as the ANYTIME minutes that do. There are no FREE minutes on Pre-Paid unless you pay $1 up front for each DAY you use your phone, and this is a surcharge only. Yu are still charged on your Minutes in addition to the $1/Day surcharge. $1/per day times 30 day in month is $30 surcharge NOT INCLUDING your charge for minutes used between 7AM and 7PM.

    If you are a frequent, at least one call per day, or even every other day, Cell phone user, habits are hard to break and Pre-paid will cost you more, and you will not get a new and more fancy phone for free each year or two.

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  17. […] turns out that Karp is something of a prepaid phone evangelist. But no wonder! In this piece from last December, he describes the benefits of switching two cell phones in his household to prepaid: The net result […]

  18. […] turns out that Karp is something of a prepaid phone evangelist. But no wonder! In this piece from last December, he describes the benefits of switching two cell phones in his household to […]

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