For many years, wireless phone companies offered huge discounts on phones to people who signed long-term contracts, often as long as two years. But in recent years, the trend has been moving in the other direction, as prepaid phones have become much more popular. With prepaid phones, you generally pay for the phone upfront and pay for your service on a month-by-month basis. There are some financial benefits to going with a prepaid phone. Here are three of the biggest ones.
Service is Cheaper
One of the biggest financial advantages of prepaid phones is that they are cheaper when it comes to service. Because you are only paying the cost of the service and not subsidizing a phone, you pay much less. For example, a monthly contract rate that costs you $50 a month or more may only cost you $30 a month for a prepaid phone. You still have to consider the cost to get the phone, but if you are not worried about having the latest and greatest phone with all the bells and whistles, you can often find cheap or used phones that will work with a prepaid plan.
You Don’t Need Great Credit
One of the issues with a two-year contract is that because the carrier is subsidizing the phone over that two-year period, it’s like a loan, and some carriers want to check your credit score. If you don’t have a great score, you may not be able to qualify for the two-year contract, which means you can’t get the great deal. In some cases, the carrier may charge you higher rates if your credit score isn’t good. With a prepaid phone, because you own the phone outright and pay month to month, there is no credit check needed to qualify for service.
There are a couple of ways prepaid phone plans benefit you financially when it comes to flexibility. For one thing, such plans often offer more limited-use options, which means you can pay less to get fewer minutes or less data if you don’t need more. Contract plans usually lean toward giving you more but also charging you more. Prepaid phones also offer flexibility when it comes to switching plans. If you are month to month and own your phone, you easily can switch to a better or cheaper plan. If you are on a two-year contract, you usually face high termination fees if you want to end your contract and switch to another plan.