Prepaid vs. Postpaid phone services

A prepaid plan with your phone carrier is a concept similar to that of a calling card - you purchase minutes upfront and they get depleted as you use them.

But here we are talking of the phone service itself being prepaid, not of a calling card sitting on top to make cheaper international calls, for instance.

Prepaid rate plans are available with both landline and mobile carriers, though they are more commonly associated with cellular services. While most people think of a regular phone service being postpaid (you use the phone and get a monthly bill), prepaid plans have been shooting up in popularity in recent years.

Here are some advantages of a prepaid plan vs. a postpaid one:

  1. Most postpaid plans require you to sign a minimum duration contract (generally 1 to 2 years). Prepaid plans are contract-free by definition (since you only get to use what you've paid for).

  2. Prepaid plans let you manage your monthly budget better. You set aside and pay for the phone service upfront. If you use up your minutes, you can extend the service to the extent desired. There are no suprises at the end of a billing cycle.

  3. Since such plans are paid for in advance and no credit is involved, the phone company does not do a credit check. So if you are a new immigrant with too short a credit history; have a poor credit score; or otherwise don't want to use credit, a prepaid plan is ideal.

  4. For reasons similar to the above, prepaid plans do not require a refundable security deposit.

  5. With a prepaid plan, you don't have to keep track of monthly statements, and are free from related pains like late fees and the like.

  6. Prepaid plans are a great option for people who use their phones sparingly. They get to pay for actual usage only. In postpaid plans, you often have a minimum monthly payment (that includes a variety of rental and government fees and levies) irrespective of use.

  7. If you have teenage children or older parents visiting and need to give them a phone for emergency purposes, a prepaid plan again works best.

  8. If you eventually want a postpaid plan, but don't know which one (i.e. how many minutes) to choose, start with a prepaid plan. This will help you figure out your usage pattern every month.

So what's the catch? If prepaid plans are so good, why doesn't every one take up one? Why is a regular phone service still considered one where you subscribe to the provider and pay your monthly bills later?

Well, for one, prepaid plans are slightly more expensive on a per minute basis. Second, these plans often have a time limit - if you don't use your minutes within a certain time frame, you lose them. Third, you can't accept collect or third-party billed calls. And finally, the choice of phone instruments offered with such plans is narrower, and the phones aren't so good (since you are not bound by contract and the provider is therefore less inclined to subsidize a more expensive phone).

All the same, I would strongly recommend you consider a prepaid plan before commiting yourself to a postpaid one. You might find it worth your while in a given personal situation. Also remember, technologically prepaid services work the same way as postpaid. There is no visible way of anyone knowing whether you are using a prepaid or a postpaid service.

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