If you use your cell phone sparingly and pay for unused minutes month in and month out, switching to a pay-as-you-go plan could save you a bundle—$100 or more a year.
Instead of paying a flat rate every month whether you use your phone or not, you buy minutes in advance and replenish them as they're used or expire, typically within 30 days to one year, depending on the number of minutes you buy. And there's no credit check, no contract, and no termination fees.
Plans vary greatly. Some are strictly by the minute, while others offer unlimited nights and weekends but charge an access fee of $1 or $2 for days on which you use your phone. Texting and picture messaging may be offered as well.
Here's one example: With T-mobile you can buy 1,000 minutes that are good for one year for $100 plus tax. (If you refill your account before the expiration date, you can carry over those minutes.) That works out to less than $10 a month for 80 minutes, ample for anyone who carries a phone mostly for emergencies or occasional calls when they're traveling or running late.
Some 15 percent of cell customers use prepaid phones, according to a 23-city survey conducted by the Consumer Reports National Research Center. Most are light users who like the lower cost and the fact that they aren't shackled to a two-year contract.
Prepaid plans aren't for everyone. If your cell phone is always glued to your ear, or if you're addicted to text messages, a standard monthly plan might be more cost-effective for you. (Still, even moderately heavy talkers could be pleasantly surprised with savings by going prepaid.) If you think a prepaid phone could work for you, here's how to go about getting one:
Pick a carrier. Major carriers offer prepaid plans, as do smaller carriers that use the bigger companies' cell towers. Well-rated carriers include Virgin Mobile (which uses Sprint's network), TracFone (uses AT&T‘s network), T-Mobile, and Verizon. Our Ratings of cell-phone service (available to subscribers) in 23 cities can help you choose the best carrier for your area.
Choose a phone. First see if you can use your existing phone with a carrier's prepaid plan. If not, check our Ratings of cell phones (available to subscribers) to find a new one. For light use, a budget-priced phone is probably all you need. Our Ratings list several that had very good voice quality and sufficient talk time, but fairly basic cell phone features. Don't expect GPS navigation, although one offers Bluetooth support.
Research the best plan. Prepaid carriers offer an array of options—a monthly fee for a set number of minutes, a pay-per-minute plan, daily access fees, and so on. Some offer free nights, weekends, and in-network calls like many contract plans do. The common thread is that you pay in advance, typically using a credit card online, on the phone, or at the carrier's stores or kiosks. Do some research comparing your current plan to prepaid ones. Calculate how much you pay versus how many minutes you use, and see whether a prepaid plan could be a bargain. Be forewarned: not all are.
For more on buying a prepaid phone, see our January report "How to buy a prepaid phone," as well as Jeff Blyskal's report on the CR Money Blog.
—Nick K. Mandle