Pay-as-you-go cellular: Beware these gotchas

Prepaid phone service can reduce your monthly cell-phone costs, but not every prepaid plan assures you of savings. Here are a couple of features to avoid with pay-as-you-go prepaid plans, along with better alternatives—including, in one case, a contract plan.

Paying for minutes, as with a contract plan. Any prepaid plan that works like a contract plan—set monthly fee for a set number of minutes—runs counter to the main appeal of prepaid, which is to buy only what you need, and sets you up for overbuying minutes.

For example, AT&T's "GoPhone Pick your Plan" charges $50 a month for 400 minutes and 3,000 included night and weekend minutes.

If you need only 400 or so daytime minutes per month, skip the above deal and check out an AT&T contract plan, "Nation 450". This plan provides more daytime minutes (450) and more included night and weekend minutes (5,000) for a smaller monthly fee ($40). Better yet, consider Verizon Wireless' "Nationwide Basic 450" contract plan, which is similarly priced, but provides unlimited night and weekend minutes.

Paying a daily fee, regardless of use. Boost Mobile's "Daily chat & text" prepaid is a plan we've had misgivings about since we first saw it. It charges $1 per day, regardless of whether you use the phone. That amounts to a minimum monthly fee of $28 in disguise. On top of that, you pay 10 cents per day-time minute. Talk a mere 200 minutes in a typical month, and the daily fee plus per-minute charges add up to $50.

At that rate, you may as well sign up for Boost's $50 unlimited plan, Virgin's $50 unlimited plan, which are available nationwide, or check out newcomer Straight Talk's $45 unlimited plan, which is currently available for activation only if you live in the green areas on this service map.

If you don't talk much, say, only about 100 minutes per month, Boost's "Pay as you go" plan, will be cheapest, because it charges just 10 cents a minute only for the minutes used, with no daily or monthly fee for regular voice cellular service. (Text messages are 10 cents apiece, less than a la carte rates with most contract plans.) And minutes do not expire, as they do with some other per-minute plans, because you don't buy minute bundles. With this plan, you prepay dollars to your account at least once every 90 days, and spend them only on the minutes you actually use at a rate of 10 cents per.  —Jeff Blyskal