Once pricey options for those who didn't have the credit to qualify for traditional plans, prepaid cell phones have come down to Earth. As their costs plummet and handsets improve -- offering text messaging, personalized ring tones, and even games -- these phones are becoming enticing alternatives for anyone who has had enough of frightening overage fees and restrictive two-year contracts.
Prepaids might save you money, but they're also a good way for new users to try the technology. Senior citizens who haven't used a cell phone may appreciate the simplicity, while teens buying a first mobile can learn the responsibility that comes with it without running up a tab. And parents paying for their kids' talking habits can be sure they won't wind up owing $400 at month's end.
Prepaid plans are just what they sound like. You buy a "starter kit" at a retailer such as Best Buy (TGT) or Circuit City. It includes the phone, some accessories, and anywhere from 10 to 60 minutes. You then open an account with the wireless company and pay for airtime up front. When you run out of minutes, you buy more. If you decide you no longer want the plan, simply let it expire.
There are other benefits. You avoid monthly taxes, which can add more than $15 to a New York City bill. And most plans aren't peppered with extra charges, such as activation fees. Generally, if you buy new minutes before the old ones expire, you can carry the old ones over.
Choosing the best plan can be tricky. There are many variations, and no carrier offers a clearly superior deal. Most charge from 10 cents to 60 cents a minute. With some accounts, daily access fees also apply. Such plans usually offer lower per-minute rates, which might be good for the garrulous. But watch out for expiration dates. Some carriers make you add minutes or cash each month to keep your account active. Others compensate for higher per-minute rates by offering free or discounted minutes during off-peak hours. Many include fees for roaming, international long distance, text and multimedia messages, and downloads of games and ring tones.
As with traditional plans, consumers should read the fine print. But unlike their predecessors, today's prepaid plans won't have you forking over your life savings for talk you thought was cheap.
By Jessi Hempel