Prepaid Vs. Contract: Which Is Right For You

by Anna P. | April 6th, 2010 | Money Saving Hints

Most people who purchase cell phones choose the contract cell phone. If you want the latest phone models, have a secure job, and have a good line of credit, the contract option is probably the best choice. As for those who lack a solid credit history, have a part-time job, and who don’t want to sign a contract for two years, it’s smartest to go with prepaid. Before you purchase your next phone, you might want to consider both options to find out which one saves you more in the long run.

The newest phones are released exclusively to one or two of the big carriers (AT&T, Sprint, T-Mobile, and Verizon). Since many people switch or upgrade phones every few years, a 2-year contract makes sense, as it lets you upgrade your phone with every contract.  The biggest problem with contract phones is that it all adds up.  One trick that many cell phone companies like to use is offering the latest trendy cell phones for free or almost free, yet they get you with a contract and extra fees like activation fees, monthly fees, and often a separate data plan. If you take the time to add up the total cost for a two year service, you’ll find out that what you didn’t pay for the phone certainly will add up in the contract. And if something happened within the two years  you signed up for, you can pay heavily for breaking the contract.

Fortunately for us, prepaid phones have come a long way from basic. Many standard phones come with a  variety of fun features like MP3 playing abilities, web browsers, games, cameras, and more. In fact, some companies like Boost Mobile offer pre-paid versions of high end smart phones like the Blackberry, which will let you text, send instant messages, listen to music, watch videos, download apps, and more. The bad side is these phones cost over $200, but there is no contract or extra fees like early termination fees, which will save you more in the long run.  In the end you always should outweigh the costs and read the fine print before making any purchase.

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