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Overview

Cell-phone service: Prepaid pays off

Last reviewed: September 2009
Illustration of money on a cell phone
Illustration by Christoph Hitz

Prepaid cell-phone plans that offer unlimited calling and require no contract have dropped in price and surged in sales. The $50 plans from prepaid specialists Virgin and Boost Mobile have prompted us to refresh our January 2009 analysis of plans to find which might deliver the lowest-cost service for various cell-phone users.

We compared 152 plans available nationally in late June 2009 from eight carriers (AT&T, Boost Mobile, Net10, Sprint, T-Mobile, Tracfone, Verizon Wireless, and Virgin Mobile) to see how much they would cost 11 model customers with different cell-phone usage. (Findings apply to many but not all cell-use patterns.)

Prepaid is often cheapest

A caller who needs 3,000 minutes of voice service per month and no text or Web service would pay $600 per year for Boost’s and Virgin’s unlimited plans vs. $1,200 for similar plans from AT&T, Sprint, T-Mobile, and Verizon. (Boost includes unlimited text and Web; Virgin charges extra.)

Callers needing just 100 minutes of voice service per month would be better off with a prepaid pay-as-you-go plan: The user pays 10 cents a minute just for minutes used. Boost’s Pay As You Go costs $119 per year—$240 less than the next-best contract plans from the big-four carriers.

But prepaid isn’t for everyone. Traditional contract plans proved cheapest for many families. Our model family using 2,800 minutes per month on four phones, with low text and Web use, would save the most—$73 to $1,393 per year—with Verizon’s Nationwide Basic Family Share Plan 1400.

New player shakes things up

As we went to press in July, Tracfone launched Straight Talk, using the Verizon network. It offers two simple, prepaid plans: Unlimited, with unlimited minutes and texts plus 30MB of Web use for $45 for up to 30 days’ service, and All You Need, with 1,000 minutes, 1,000 text or picture messages, and 30MB of Web for $30 for up to 30 days’ service. In early July, phones with Straight Talk service were sold at Walmart in 11 cities and at www.straighttalk.com. The site’s map showed that service could be activated in roughly half the U.S.

If you’re under contract for your cell phone, some or all of your first-year savings from switching carriers can be eaten up with termination fees. And although price was a top complaint in our most recent survey, quality of service is also important.

Our survey last year found few differences in satisfaction among users of T-Mobile, Tracfone, Verizon, and Virgin prepaid services. In our connectivity ratings across 23 metro areas, the AT&T network (used by Tracfone) and T-Mobile had relatively more areas with problems, including no service, dropped calls, and static. The Sprint PCS network (used by Virgin) had fewer problems. Verizon had no areas with below-average ratings. We didn’t rate Sprint’s iDEN network (used by Boost).

Bottom line

If you’re off or almost off a cell-phone contract, it might not cost much to try prepaid. Basic phones cost as little as $10 and there’s no contractual obligation. Ask your carrier whether your current cell phone will work if you switch to their prepaid plan.