What Is a Prepaid Phone? The Pros and Cons of 'Burners'

Prepaid phones could also come in handy if:

A prepaid phone plan provides the basic services of regular cell phones. However, there's no long-term contract requirements or overage charges for minutes that exceed the monthly plan. And, signing up is easy.

You can find cheap options at retail outlets, electronics or discount stores — or even through major carriers like AT&T (formerly Cingular), T-Mobile and Verizon, who've added prepaid options to their plan mix.

You'll find that prepaid phones (sometimes called "burner phones") work just like any other, although without a long-term commitment and some of the bells and whistles.

You buy a cell phone with a set service (amount of data usable over a certain number of months). If you go over your data limit, you can buy more minutes immediately or within a time limit. Or you can just stop using the phone.

The main advantage of prepaid services 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 or data. And you don't have to pay a monthly bill.

Talking more one month and less the next makes no difference, and leftover minutes will often 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.

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. These advantages make a prepaid phone work particularly well for the following instances.

Parents of Teenagers

If you don't have any minutes left, you can't make calls or send text messages, although you can still make calls 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 set number of minutes or amount of data, 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

No contract means no credit check or need for an address, making it ideal for making phone calls while traveling. If overseas, you can get a prepaid phone number for the duration of your stay.

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 prepaid phones don'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.

While prepaid phones offer many advantages, they also can present problems for their users. Depending on your usage patterns, you could end up with a higher cost per minute, a serious disadvantage for anyone who makes a lot of phone calls.

With increased interest in the prepaid market, prepaid phone rates have dropped and plans improved. Prepaid provider Boost Mobile, for example, offers a flat-rate, monthly unlimited talk plan for $25 in some states.

In most cases, however, per-minute rates still usually are lower with traditional contract plans [source: TMCNet]. Here are some other disadvantages with prepaid cell phones.

Prepaid cell phones offer anonymity, and that's not something everyone likes — particularly law enforcement agencies. In Texas, a state senator once introduced a proposal that targeted gang members, who often use the so-called "burner phones."

When you start looking at prepaid cell phone plans, you'll find a lot of variations. You can, for example, buy a regular cell phone with basic service and then just add minutes as you need them.

You can select a more high-tech phone with added features and services, and you can buy larger bundles of minutes to get them more cheaply. You can also choose a prepaid phone contract that's almost a hybrid of a prepaid plan and a traditional monthly plan.

Start with the plan, not the phone, experts advise. Then look at the service quality you can expect to receive from the plan in your area. Finally, whether you choose true pay-as-you-go or a monthly plan, look closely at charges as well as minute rates. These may include:

Once you've picked your plan type, the next decision is which provider to use. Let's look at that next.

Prepaid cell phone providers can be classified as mobile virtual network operators (MVNOs) or traditional wireless carriers. The MVNOs focus on the prepaid phone business, leasing space on traditional carriers' networks rather than having their own.

Among well-known MVNOs are Boost Mobile (a Sprint subsidiary), TracFone (a subsidiary of American Móvil, a Latin American wireless provider) and Mint Mobile. Here are some brief overviews of these companies, based on reviews and surveys of prepaid phone users.

Traditional cell phone providers have done business mainly through long-term monthly contracts with customers. However, they also are stepping up and sweetening prepaid offerings to get a piece of this growing market. Traditional providers with prepaid offerings include AT&T, T-Mobile and Verizon. Here are some strengths for each, again based on surveys and reviews.

Making international calls from your prepaid cell phone may be easy — if you're calling from the United States and your prepaid plan offers an international option. If you plan to make calls from another country, however, you probably want to consider other options, like an international prepaid cell phone.

Let's say you're calling from within the United States. All you need to do is dial 011 + the country code + the city code + the phone number. For some countries — like Canada, Puerto Rico or Jamaica — you don't even need to dial 011.

If you're calling from another country, however, you're likely to have a problem with your phone's compatibility with local networks.

Cell phone networks in the United States use several different technologies to transmit information. Only one of these, time division multiple access (TDMA) supports Global System for Mobile Communications (GSM), the international standard used in Europe, Australia and much of Asia and Africa.

Cell phone users in those countries can buy one phone and simply switch to a different SIM card for phone access in each country.

If you're going to be spending an extended time in a country, another option is to buy a prepaid cell phone once you arrive. In almost every country, you get unlimited incoming calls for free.