While prepaid smart phones are not for everybody, the
opportunity to purchase an iPhone or any other state-of-the-art device without
a long-term carrier contract is an attractive value proposition for many
consumers. For the first time since its debut in 2007, the iPhone is now
available with no contract via Leap Wireless and its Cricket cellular
service provider. Beginning June 29, Virgin Mobile USA will
also be marketing Apple’s iconic smart phone with flexible, month-to-month
subscriptions. Expect other top-of-the-line smart phones to follow suit,
meaning those turned off by limited device options in the past now have cause
to reconsider a prepaid plan. Before deciding whether a prepaid smart phone is
the best option for you, consider these pros and cons first.
Reasons why a prepaid smart phone
might be worth buying
Cheaper monthly plans: As is
the case with other devices, the prepaid iPhone plans for Cricket and Virgin
are substantially cheaper than what can be found with the larger carriers
including AT&T, Verizon and Sprint (note that Virgin Mobile USA is a
division of Sprint). On Cricket, for $55/month users can enjoy unlimited
talking and texting. They also receive 2.3 gigabytes of data each month. If
that data limit is exceeded, rather than paying more, Cricket reserves the
right to slow down transmission speeds. Virgin will offer a few packages in
that same range, including $50/month for unlimited talk and text (including
2.5GB of data before the potential of throttling). There is also a $40 option
for 1,200 minutes and $30 option for 300 minutes. Compare this to the
major carriers, where the cheapest offer comes from AT&T with a $60/month
plan that includes 450 minutes, a comparatively puny 300 megabytes of data and
and no texting. Sprint’s “Unlimited Everything” plan goes for $70/month. Most
other plans from Verizon and AT&T that include a reasonable mix of voice,
texting and data are close to or exceed $100/month. The monthly price
differential between prepaid and major carrier packages for Android phones and
Black Berries are comparable. There are very few prepaid phones for Microsoft’s
Windows mobile platform available on the market today.
Month-to-month flexibility: Arguably more significant than
saving $10 to $50 per month on your cell phone bill is the fact that you don’t
have to enter into a cumbersome, two-year commitment with your carrier. With
prepaid options, you can choose to suspend your service at any point (if you’re
going on vacation, for instance) and pick things up at a later time. Further,
there is no early termination penalty if you choose to change carriers or want
to discontinue your service.
No credit checks: If your credit score is below a
certain level, the major carriers will make it difficult to sign-up for a
long-term plan. Even if you are deemed eligible enough to pay them thousands of
dollars over a two-year period of time, a poor credit rating may cause you to
pay extra either at the onset of your contract or over time. With the prepaid
option, you invest in the service upfront and don’t have to worry about credit
checks or associated penalties.
The biggest hang ups in
purchasing a prepaid phone
Sticker shock: Because prepaid phones are not
subsidized by the longer-term income a two-year contract provides, the purchase
price for devices is significantly higher than what is typically offered by the
major carriers. The 16GB iPhone 4S, for instance, can be purchased for $199
with a two-year plan. The same device from Cricket will run you $499, while
Virgin is selling the iPhone 4S for $649. You will generally see comparable
prices for prepaid Android smart phones and Black Berries.
Data limitations: The more advanced smart phone
you own, the more data you are likely to consume over a given month. According
to research, iPhone users on average go through about three times the amount of
data as other smart phone owners. Android smart phones, particularly those
manufactured by HTC, also generate significantly more data consumption than
less advanced devices according to the report. The ability to play games,
download and stream videos and constantly check-in with your Face book friends
throughout the day on these devices no doubt leads to higher data usage. While
the prepaid plans don’t increase in price after a monthly data quota is hit,
speeds slow down considerably, making it tough to enjoy many of the features
that inspired you to purchase a smart phone in the first place.
Inferior
networks: Cellular networks that
specialize in pre-paid plans are typically not as robust as the four major
networks. This is also true for smaller carriers that lease network space from
the bigger networks at wholesale and then market discount services to
consumers. Faster 4G connections that are available for many Androids and Black
Berries (and will likely come to iPhones later this year) are not in place on
the smaller, regional networks. It is not realistic to expect a Cricket or
Virgin to offer the same level of service as the big boys. This could become a
bigger problem over time, particularly for heavier users. There is also no
guarantee of nationwide coverage, so check your carrier’s coverage map before
purchasing a phone. In fact, you can’t currently buy a prepaid iPhone from Cricket in Chicago and other major markets.
A good deal overall for moderate users
Despite these issues, there is
no better time than today to purchase a prepaid smart phone. With iPhones
entering into the picture, there is no longer the stigma (or reality) that
prepaid plans are the realm of second-tier devices. If you anticipate using
your smart phone moderately, and are not engaging in heavy data-consumption
activities like video streaming and multiplayer gaming, a prepaid plan might be
the best bang for your buck. Over time, you will save significantly more money
and have the flexibility to pause or suspend your service for any reason. Beyond
Cricket and Virgin, there are several regional carriers including Boost Mobile, Jitterbug and Metro-PCS that offer prepaid plans. And while
the major carriers have begun to market their own prepaid options, the devices
they currently offer for those plans are extremely limited. That may motivate
you to commit to a two-year deal after all.
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