Is prepaid better than postpaid for cell phone plans?

by Yale Holder 

In North America, there has been an explosion of prepaid plans over the last 2 years. This was mainly due to the launch of new wireless carriers in the market place, all advertising the benefits of no contracts and no fixed term contracts. This gives many customers the option to avoid the long term contracts promoted by the big wireless cell phone providers. But is prepaid actually better than postpaid? Let’s examine these two options.

Why Prepaid?

There are several reasons to get a prepaid plan and there are many benefits to do this. Here are a few reasons you may consider going with a prepaid plan:

Budget Conscious. Prepaid cell phone plans are bare bones and they provide a low cost and predictable payment schedule. You spend what you pay for, so you won’t end up with $1,000 monthly bills because you left your phone on downloading a movie or you had a longer than expected long distance call.

No commitments. If your job or lifestyle is transient in nature or you cannot commit to a long term contract then prepaid may be just right for you. You can cancel at any time, get another phone or change plans without any restrictions.

No credit, no problem. Postpaid plans typically require a credit check, so if you are a new immigrant or going through some financial difficulties, then the prepaid may be the best option for you.

I have a phone already. One of the main reasons to take a term contract is to subsidize the cost of the phone, but if you already have a phone then you can get one of the prepaid plans by one of the new entrants or even one from the big three if coverage is a major concern.

Given that the market in is GSM / HSPA dominant and that phones (when unlocked) from one carrier can be used on any other carrier (with a few exceptions) the number of prepaid customers have grown inNorth Americaand continue to grow each year.

Why Postpaid?

While the number of prepaid subscribers is growing, largely due to the large number of options for cell phones in the marketplace, postpaid plans still makeup about significant portion of the market. Let’s examine why this is the case:

Lower Phone costs. The main reason postpaid still dominates is the cost of the new cell phone aka the smartphone. Apple’s iPhone which dominates the market can cost as high as $1,000 (taxes included) for its top model, the iPhone 4S 64GB retails for about $850 (before taxes) without a contract. That’s a big commitment to make on a phone, but on a 3 year contract that costs falls to $369 before taxes saving about $500 on the cost of the phone. The same goes with Android and BlackBerry smartphones. Given that these cell phones makeup more that 50 per cent of new phone purchases, many people will opt for a term contract to get these phones.

I travel a lot. If you travel to the US or overseas and you would like to use your phone, many (but not all) prepaid phones won’t work unfortunately. You will need a postpaid type contract to have uninterrupted cell phone coverage while you travel abroad – be wary however of those high roaming charges and explore roaming cell phone plans before travelling.

More options. Postpaid plans give customers many more options than their prepaid counterparts. The big three carriers have their promotions mainly around postpaid plans. So some features may be available on postpaid and not on their prepaid counterparts, options like unlimited calling between family members or shared data plans to name a few.


So which is better? Well it depends on your circumstances, if you already have a phone but just need a simple plan then I would examine the prepaid option, but if you want the latest and greatest cell phone or you travel extensively then the postpaid option may be the better option for you. If you are looking for just the best cell phone plan, prepaid or postpaid then leverage a cell phone plan comparison Web site to help you make the right decision.

Yale Holder is co-founder of myCELLmyTERMS, a Toronto-based company that helps cell phone users negotiate wireless plans with independent dealers.


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