How Prepaid Cell Phones Work

Advantages of Prepaid Cell Phones

­Some prepaid cell phone plans allow users to send and receive text messages.
­Some prepaid cell phone plans allow users to send and receive text messages.
© Photographer: Simone Van Den Berg | Agency: Dreamstime

The main advantage of prepaid cell phones is the combination of freedom and control that they offer. With a prepaid cell phone, you're not locked into a multi-year plan with a set number of minutes per month during specific calling times, additional charges if you exceed the limit and a costly fee if you break the contract. You're free to talk whenever you want, as long as you want, until you run out of minutes. And you don't have to pay a monthly bill.

Talking more one month and less the next makes no difference, and leftover minutes roll over from one month to the next. Plus, if you want to change to a different type of plan, a prepaid phone gives you the freedom to switch whenever you want.

These advantages make a prepaid phone work particularly well for:

  • Parents of teenagers. If you don't have any minutes left, you can't make calls or send text messages, although you can still call #999 for emergencies and, with some phones, receive messages stored until you have the minutes to view them. Parents can buy a cheap cell phone for a teen and a card per month for a set number of minutes, leaving the teen to budget use and pay for additional minutes.
  • Occasional cell phone users. If you only use a cell phone for emergencies and perhaps a few calls a week, you don't need a fancy phone or a complicated billing plan. A prepaid phone may work well, but make sure you know about any time limit on unused minutes.
  • Short-term users. Buy it, use it on vacation or while your regular cell phone is missing or broken -- and then throw it away.
  • Trial users. Before committing to a long-term cell phone plan, use a prepaid phone for a month or two to gauge what your (or your teenager's) actual usage will be. Then you can find a plan with the minutes and calling times to match.
  • Young adults and others with no credit history or credit card debt. Buying a prepaid cell phone doesn't require a long-term contract and credit check, so students with part-time jobs or older adults with no use of credit or a less-than-perfect credit record can get a phone easily.

Because they don't require a contract, prepaid phones are fast and easy to buy. They also are available at many locations, ready to use immediately and even disposable.

Next, let's look at some of the problems with using prepaid cell phones.