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Is prepaid the way to go?

If you own a smartphone, you know what it’s like to be trapped in a two-year contract. You probably also know that breaking that contract results in a staggering cancellation fee.


That’s why some people prefer prepaid phone plans. According to one tech research firm, no-contract phones now account for nearly 25 percent of the U.S. market, up from 17 percent just a few years ago.

With no-contract carriers, you pay by the month and can drop the plan at any time. Depending on what’s happening in your life, this can save you money and aggravation.

In the past, most prepaid phones were frankly lame. If you wanted a top-of-the-line iPhone or Android you had to get married to AT&T, Sprint, Verizon or T-Mobile.

The prepaid playing field has shifted significantly now that Google has begun selling a contract-free Galaxy Nexus, and the iPhone has made its way to major prepaid providers.

The long-term cost-savings of these phones and month-to-month plans are very compelling. If you can afford the full, upfront price of the smartphones, you can save hundreds of dollars over the life of a typical two-year contract.

Let’s launch the calculator app and take a closer look.

A 16GB iPhone 4S will cost nearly $2,400 over two years with AT&T or Verizon. That includes the subsidized phone cost of $200, plus $90 per month for data, texting and 450 minutes. A subsidized Sprint iPhone 4S costs $200 and $80 per month for unlimited use; that’s a 2-year total of a little more than $2,100.

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