Does Prepaid Save You Money?
I've spent my entire cellular life trying to adhere to a diet of minutes that never exactly suits my needs. One month, I have spare minutes. The next month, with a brief, poorly timed call to my mother, my bill doubles. Every time I shift plans, I lock myself into another year-long contract. So when I saw an ad for Virgin Mobile USA's prepaid plan, I decided to check it out. After all, it seemed like a novel idea: You pay for the minutes you use.
Prepaid has some great benefits. Instead of a contract, you buy a "starter kit" at a retailer such as Target (TGT ) or Wal-Mart Stores (WMT ). It includes the phone, some accessories, and usually a set number of minutes to get you started. You avoid monthly taxes, which can regularly tack on upward of $15 to a typical New York City bill. And most prepaid plans aren't peppered with extra charges like activation fees. Plus, you never run over your minute allowance. With most plans, if you buy additional minutes before the old ones expire, you can carry them over. What could be better?
Most traditional plans, actually. With average minutes prices ranging from 15 cents to 25 cents per minute, prepaid plans still don't match the prices of a well-selected monthly contract, in which you can find rates as low as 8 cents per minute. Even if you frequently run over your minutes and pay extra fees, frequent talkers will probably do better with the standard model.
Still, prepaid plans are a good option for those who just want a phone for emergencies. They're also great for young adults with no credit history, which is needed to qualify for most regular plans. And parents may prefer prepaid plans for the kids rather than risk letting them run up huge charges on a conventional plan.
Virgin Mobile USA had the youth market in mind when it created a product with great teen gimmicks, such as celebrity voice-mail greetings -- your choice of celeb, from Destiny's Child to Isaac Hayes, for $2.95 a message. You can also schedule a 25 cents phone call from the company to rescue you, say, from a date you fear may go bad. The rates, though, are the real draw: They're easy to calculate and cheaper than competitors'.
Another teen pick, from Nextel Communications (NXTL ) subsidiary Boost Mobile, doesn't have Virgin Mobile USA's features, but it's hawking its products in surfing-store chain Quicksilver (ZQK ) and music retailer Sam Goody. Boost cuts through pricing confusion with one 25 cents-per-minute price regardless of how many minutes you buy or when you use them. And the phones, like Nextel's business-oriented products, have walkie-talkie capabilities. Boost is only in California and Nevada, but a spokesperson says Boost will roll out in six or seven new markets later this year.
A BLEND OF BOTH. AT&T Wireless Services' (AWE ) GoPhone option blends features from traditional and prepaid plans. There's a contract and a monthly charge for a set number of minutes. But your minutes are replenished every time you use them up or every 30 days. True to prepaid, you pay for what you use, and you can bank the remaining minutes from month to month. This is a good plan if you often run over your minute allowance. GoPhone minutes still cost more, though -- 10 cents to 25 cents -- so if you can find a traditional plan you can stick to most of the time, that's your best option.
One danger with prepaids: If you let your minutes lapse, you could lose your phone number. Most plans give you a grace period to replenish. These periods range from T-mobile International's generous 110 days to Cingular Wireless' 30-day window. TracFone Wireless gives you fewer than two weeks -- hardly long enough to remember you forgot to pay. But TracFone does offer a year-long service option, making it a great glove-compartment phone for those seeking emergency availability.
I'm not ready to go prepaid, even if it means a rescue from a bad date. I'll stick with my traditional plan with its 800-minute diet until prepaid prices fall. Just don't expect to hear from me from until the 18th of the month -- when my next billing cycle starts.
By Jessi Hempel