Why are prepaid phone plans cheaper?


Prepaid phone plans are a great way to save money on your phone bill while retaining most of the benefits, but you don’t hear about them as often as post paid plans—the standard pricing model with sleek branding and bundled extras. For most carriers, prepaid phone plans offer the same benefits for your mobile experience as their postpaid counterparts, but they aren’t advertised as much. However, it’s worth taking the time to find them, as they might suit your needs better.

So whether you’re looking to buy a brand new Samsung Galaxy S22 or are eagerly awaiting the release of the Pixel 7, it’s worth taking a look at prepaid phone plans to save some cash. However, there are a few important considerations that come with the lower cost.


What is a prepaid phone plan?

Although the details of prepaid phone plans differ from carrier to carrier, the basic principles remain the same. Prepaid phone plans allow you to pay your monthly bill before the start of each monthly billing cycle, rather than paying at the end like postpaid. They don’t require a credit check or a contract, because you only use the voice, text, and data services you paid for upfront.

Let’s take a Verizon line as an example, starting with the standard unlimited plan (postpaid). It offers unlimited calls, texts and data. It doesn’t require a contract, but you’ll need to get a credit check first. It also requires an activation payment of $35 at the time of setup.

This is Verizon’s equivalent prepaid plan. It offers the same unlimited benefits, but for $10 less. Verizon also offers a loyalty discount, which brings the cost down to $55 after 3 months of continuous service, then to $50 after an additional 6 months.

A difference of $10 might not seem like much at first, but over 36 months, that’s a savings of $660 when factoring in the discount. The savings and benefits differ from carrier to carrier, but in general you will see a reduction in the monthly bill.

Why does a prepaid phone plan cost less?

Although the standard monthly bill for prepaid phone plans is lower than their postpaid equivalents, they are often subject to network deprioritization or throttling and include fewer benefits. For example, T-Mobile is offering postpaid subscribers free Netflix subscriptions, and AT&T is offering HBO Max and six months of Google Stadia Pro on its plans. Verizon offers a 6-month subscription to Disney+ with its basic unlimited postpaid plan, with additional perks like cloud storage, hardware discounts, and free international calls, texts, and data. Offers and discounts can also make postpaid plans a better option.

When a network is particularly busy, carriers prioritize users with postpaid plans, which are more cost effective. This is done through data limiting and data deprioritization. Data throttling means that prepaid users will generally have a lower broadband data cap than postpaid. For example, a prepaid plan may offer 40 GB of high-speed Internet before braking, compared to 50 GB for a postpaid plan. Data deprioritization occurs when the network is too busy; they will slow down prepaid users first, freeing up the network for others. This means you may experience spotty connectivity when talking or texting in a busy area. If you require HD video streaming, a prepaid plan may not even offer unlimited streaming as an option.

Operators also tend to offer better deals for their prepaid plans. For example, at the time of writing, Verizon is offering a free iPhone 13 with one of its postpaid unlimited plans; no such agreement exists for their prepaid plans. Carriers also tend to offer deep discounts for families; the same Verizon Unlimited plan listed above is discounted to $35/line for a family of four.

Prepaid plans and MVNO

When we talk about prepaid plans, we should talk about mobile virtual network operators (MVNO). These are carriers that don’t own their own infrastructure, so they lease it from one of the big four carriers (Verizon, T-Mobile, and AT&T). Some examples of MVNOs include Google Fi, Mint Mobile, and Simple Mobile. MVNOs only offer prepaid plans. For this reason, they generally offer fewer bonuses when signing up and have fewer plans available. You may also be subject to data throttling and data deprioritization because, unsurprisingly, big carriers prioritize their own users. Signing up for an MVNO plan often doesn’t require a credit check either. So, if you are exclusively looking for a prepaid phone plan, look for MVNOs. While big carriers treat prepaid plans as a side business, for MVNOS it’s usually their only business.

Should I subscribe to a prepaid telephone plan?

The decision whether or not to opt for a prepaid plan depends on many factors. Even though the monthly cost is lower, the added benefits of postpaid plans can translate into a better overall deal. If price is the only factor that matters, a prepaid plan will win every time. If you’re still torn between prepaid and postpaid, our roundup of the best data plans can help you decide.


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