Prepaid cell phones have come a long way since their humble beginnings in the early 1990s.
Once the only option for people who didn’t have a credit card, couldn’t qualify for a contract with a cell carrier or wanted the phones only for emergencies, prepaid cell phones have added enough bells and whistles to make them as attractive to consumers as contracts with Verizon, AT&T, T-Mobile, Sprint and others.
They’ve become so popular that some contract companies have added their own prepaid plans.
"There’s a market out there for prepaid," says Sandra Landwehr, owner of a cell phone review Web site, the-cell-phone-advisor.com. "There are definite benefits to them."
Prepaid cell users don’t have to go through a credit check or sign a contract and no credit card is required. There are no charges for going over your minutes — the phone stops working if minutes are used up — and no extra fees, she says. Users also can end their service at any time with no notice required.
Most carriers require users to purchase a certain number of minutes every 30, 60 or 90 days. Some, such as Tracfone and Go Phone, provide the option to buy a year’s worth of minutes, too.
Beyond that, there are some significant differences among the prepaid carriers.
"When they first started offering them they didn’t have a lot of features," Landwehr says. "Now they’re getting a lot of their revenue from features like Web browsing, ringtones, text messaging."
When Virgin Mobile USA started in 2002, it sold basic, inexpensive phones and top-up cards in various amounts, says Jayne Wallace, the company’s vice president of corporate communications. Users paid a per-minute charge and could use as many or as few minutes as they wanted. In the past two years, the company started offering monthly plans — still with no contract — a wider variety of phones, and traditional cell phone services such as Internet access and e-mail.
Most prepaid carriers have a limited number of phones for their services because it keeps costs down, Wallace says.
"The only reason for someone to sign a contract is if someone needs an iPhone or BlackBerry," Wallace says. "If you want a $300 phone that’s what you have to do. Our most expensive phone is $100."
Their most inexpensive phone is about $12.
When Tracfone started out in 1996, it offered a basic phone, Landwehr says. Now, there are several to choose from at all price points, but with few features.
When comparing the plans, Virgin Mobile offers the least expensive per-minute price, Landwehr says. But some prepaid phones offer better coverage or even free mobile-to-mobile calls.
There are positives and negatives to each prepaid carrier but enough variety to appeal to many consumers. Here’s a comparison of several common prepaid phones.Download PDF for a comparison of several common prepaid phones.