Benefits of a Prepaid Phone vs Two-Year Contract

Cell phone users have a choice between a prepaid phone and a contract phone. A prepaid phone is a cell phone for which you pay the service fees in advance of using it. On the other hand, a contract phone is a cell phone that you can use after entering into a usage contract with a phone company. Prepaid phones have several advantages over a contract plan.

No Commitment

If you enter into a two-year contract with a phone company, you are bound to it for the said duration. If you are unhappy with the service, there is nothing much you can do, but wait it out. If you move to a new location where the reception is poor, you are still tied to the contract. If you want to terminate the contract, you will most likely end up paying a hefty amount by way of penalty. If you use a prepaid phone, you can stop using a phone company at any time if you are not satisfied with their service. You can switch to another service at any time, and not have to pay a penalty.

No Credit Check

A contract phone plan will most probably require a high credit score from prospective buyers. If you do not have a good credit score, you may have problems getting into a contract with most phone companies. The advantage with prepaid phones is that you can buy a prepaid phone card anywhere at any time, no matter what your credit score is. All you need is a cell phone.

No Fixed Fees

With a contract phone, you must pay a non-variable fee every month, for the period of the contract. Once you get into the deal, you cannot get a lower rate or negotiate, in most cases. With a prepaid phone, you can use your talk time the way you like, and pay a different amount every month, according to the credit you have remaining. Most phone companies require the purchase of a token prepaid credit every month, to keep the phone working.

Pay According to Usage

A prepaid phone requires you to pay fees every month, but this can vary according to usage. If you purchased extra credit during one month, and you have leftover talk time, you can buy a smaller amount the following month. The leftover minutes you have will be transferred to the next month. With a contract, you must pay a fixed monthly fee, irrespective of how much you use your phone. This can lead to a loss, especially when you are away from work, or are on vacation.

Plenty of Features

You can use a prepaid phone to surf the web, text message, and activate your voice mail. All these features are much cheaper with a prepaid phone than on a contract phone, unless you use the cell phone a lot.

Convenience

If you lose a contract phone, or it gets damaged in some way, it will cost you a lot of money to replace the phone or get out of the contract. If you were using a prepaid phone, the only loss would be the cost of the phone.