Contract or prepaid cell phone plan?

For those who don't want to be locked into a long contract, or who simply don't want to pay so much for service, prepaid or monthly pay-as-you-go plans are an alternative. Once the refuge of people with bad credit, prepaid plans are now a good choice for just about anyone, experts say. Many prepaid carriers now offer smartphones and unlimited voice and data plans -- just like contract plans, only without the contract. Prepaid wireless often costs less, but it uses the same networks as contract cell phone plans, so call quality and reception are just as good. In fact, all of the major carriers (AT&T, Sprint, T-Mobile and Verizon Wireless) and top-rated regional carrier U.S. Cellular offer their own prepaid phone plans. We cover such pay-as-you-go cell phone services in our separate report on prepaid wireless.

Choosing a cell phone plan

Choosing the right cell phone plan can be a challenge -- if you choose poorly, you might find yourself locked into an expensive two-year contract you don't want. Fortunately, several sources conduct large nationwide surveys and tests to find the best wireless carriers, and experts offer the following advice to help you get the right plan without paying too much:

  • Choose a service first, then choose a phone. Specific phones work with individual carrier's networks, so your choice of phones will be limited greatly by the carrier you choose. In the end, reviewers say network functionality and customer service are bigger issues than whether or not your phone has 50 fancy ringtones. LetsTalk.com allows you to compare cell phone plans side by side to see features and prices. CellReception.com is another useful site for finding the carrier with the best coverage for your area.
  • Decide whether you want local, regional or national coverage. Although most carriers are now including long distance and roaming charges in their highest-profile plans, you can save some money with a local or regional cell phone plan if you will primarily be making and receiving calls within your area. Be sure to confirm whether roaming or long-distance charges apply to your plan.
  • Estimate the number of minutes you need. Although coverage charges can quickly mount if you exceed your allotted minutes, consider starting with a cheaper cell phone plan -- but keep a careful watch on your usage. A cell phone service provider will be happy to let you upgrade to more minutes. If you already have a phone, you'll have a good idea of how many minutes you'll need. Keep in mind that you will be using your minutes both on outgoing and incoming calls with most cell phone plans.
  • Check the coverage area. Carriers have coverage maps on their websites. Some carriers are better distributed than others in rural or sparsely populated states such as Wyoming or West Virginia. That may further limit your choice of carrier. Several reviewers note that T-Mobile is accurate with its coverage maps. DeadCellZones.com is an independent site that links to many carriers and their coverage maps. The FCC has published a helpful primer on Understanding Wireless Telephone Coverage Areas.
  • Consider a prepaid cell phone plan. If you don't want to be locked into a contract, a prepaid cell phone is a good option. See our separate report on prepaid cell phone plans for more information.
  • Ask friends and neighbors. Do your own informal poll of people in your area. Those who live and work in your neighborhood can tell you how frequently they experience outages, busy networks or dropped calls. Once you gauge satisfaction, check carriers' websites for promotions, shop their retail stores and call them to see where you can get the best deal. Whatever carrier you choose, be sure to take advantage of the trial periods offered by most cellular companies. AT&T and Sprint offer 30-day grace periods in which you can return a phone and not be charged an early termination fee, whereas T-Mobile has only a 20-day grace period (30 days in California) and Verizon's is only 14 days. Or, sign up for a company's shortest contract period (usually one year). Early termination fees can be very high ($150 to $350), although most carriers now prorate them based on usage.
  • Compare products and cell phone plans at a retail store or website. Some consumer electronics stores offer one-stop shopping. For instance, Best Buy Mobile has phones and plans from different carriers that allow you to compare products side by side. Store staff can help explain phone features and plan options, and because staffers are not commissioned by cellular carriers, they may provide more impartial and candid information. Amazon.com also sells phones, contracts and renewals from multiple carriers.
  • Increase your choices with an unlocked phone. Unlocked phones let you avoid committing to a contract or being tied to a specific carrier. You'll have to pay for your phone up front, and you'll be fully responsible for any repairs, but some experts say the freedom of choice and international compatibility are worth it. Unlocked phones cost a lot more initially, however.
  • Weigh other features. Cell phone plan features such as text messaging, picture messaging, Internet connectivity, games, music, etc., are usually not free and can quickly add up. If you start with a basic cell phone plan, carriers will let you add these services later. Or you can always get a plan that bundles together the features you want.

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