Is a prepaid cell phone plan right for you?
Without a doubt, the landscape for all types of cell phone plans -- prepaid and postpaid -- has shifted dramatically in recent years. Traditional cell phone plans (covered in their own report) no longer require a contract, and subscribers that forgo a contract and the subsidized (and sometimes free) cell phone that goes with those, enjoy dramatically reduced costs for service.
But prepaid cell phone plans are often cheaper still for the same level of talk, text and data allotments, and use the very same networks that are used (and owned by) the four major nationwide carriers -- Verizon, AT&T, T-Mobile and Sprint. Prepaid plans also don't require a credit check to get service -- a necessary plus for some and a convenience for all. If you are a light user and want a pay as you go rather than a monthly plan, a prepaid plan is your only cost-effective alternative.
That would seem to make a prepaid cell phone plan a no-brainer for many, but postpaid plans continue to offer some advantages that make them a better choice for lots of users. While prepaid plans use the same networks as postpaid plans, carriers reserve some features and benefits for their postpaid customers. For example, LTE speeds may be throttled (capped at lower limits or receive lower priority) for prepaid users compared to the same network's postpaid customers. Some features, such as the ability to use your device as a mobile hot spot, may not be available, or cost extra, under a prepaid plan. Customer service might be a step below what postpaid carriers offer their subscribers -- for example, while 24/7 access to support is the norm with a postpaid plan, contact hours might be shorter with a prepaid one.
The phone selection is often limited with prepaid carriers, and some expect you to bring your own device (BYOD) acquired from a third-party source, such as Amazon.com. While most prepaid carriers will welcome almost any compatible phone that you supply yourself, some might not let you activate certain devices (typically the latest version of high-end phones, such as the Apple iPhone 6 (Est. $650 and up). As with most things, it pays to read the fine print before signing up. If a plan's limitations aren't an issue for how you use your phone, a prepaid plan makes tons of sense. And if you decide a plan or carrier isn't working out for you, the lack of a contract means that you aren't stuck in that relationship.
Types of prepaid plans
Prepaid plans usually fall into one of two broad categories: monthly or pay-as-you-go:
Monthly prepaid plans closely resemble postpaid monthly plans. You are charged a set amount each month and receive an allotment of minutes, talk and data. Plans with unlimited talk and text are commonplace, as are data plans to meet the needs of all types of users, including some unlimited plans, albeit with caps that limit the amount of high-speed (LTE) data you can use per billing cycle.
Pay-as-you-go plans charge you by the minute of talk, per text, and per megabyte of data for what you actually use. Many have either a minimum charge per month or deduct a maintenance fee from your account, have a minimum top up amount, and any unused minutes or data expire after a set period (usually 30 or 90 days, depending on the amount of money you add to your account). Experts say that these are generally a poor deal for those who use their phone a lot, but can make terrific sense for light users.
Prepaid service is available from a variety of sources. All four of the nationwide carriers offer prepaid service under their own brands. Three of the carriers (Verizon is the exception) own separate brands, with their own customer service departments and retail operations. For example, Virgin Mobile and Boost Mobile are owned by Sprint and use Sprint's network, while Cricket is owned by AT&T, and MetroPCS is owned by T-Mobile. Service is also available through MVNOs (Mobile Virtual Network Operators) that cobble together service by buying access at wholesale from the major nationwide providers and reselling it. For example, Straight Talk buys access from AT&T, Verizon, T-Mobile and Sprint; the carrier you use will depend on the phone you select to use with the service.
The newest twist are prepaid providers that rely on Wi-Fi for service, sometimes with a cell-phone carrier option to provide backup in areas where Wi-Fi is not available. Republic Wireless is perhaps the best known of these providers, and one that does well in satisfaction surveys.
Finding the best prepaid cell phone plans
To find the best prepaid cell phone providers, we looked at large customer-satisfaction surveys, such as those conducted by ConsumerReports.org, J.D. Power and Associates and PCMag.com. We also looked at reviews and comparison articles at sites such as Tom's Guide, Money Magazine, PrepaidPhoneNews.com and others. We evaluate carriers on their plans, but also on factors such as network performance and the quality of their customer service to find the best prepaid cell phone plans, along with a few alternate choices that could be worth considering.
Elsewhere in this report:
Best Monthly Prepaid Cell Phone Plans | Best Pay-As-You-Go Cell Phone Plans | Buying Guide | Our Sources