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What is a Prepaid Service Plan?

Malcolm Tatum
Updated May 17, 2024
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Prepaid service plans are business service plans that require that payment be made in advance in order to receive a service offered by a particular vendor or provider. Sometimes referred to as a pay as you go plan, the prepaid service plan allows the consumer to actively control his or her usage of the service offered. This in turn makes it much easier to manage the overall cost of the service from one month to the next.

One of the most common examples of a prepaid service plan is with cellular phones. Service plans of this type often require that the subscriber purchase his or her mobile phone, then select and pay in advance for a certain number of airtime minutes. Those minutes can be used for making and receiving telephone calls, or for sending and receiving text messages. Today, there are a small but growing number of pay as you go mobile service providers that are also offering limited access to the Internet.

In some countries, it is also possible to make use of a prepaid service plan in order to secure natural gas for heating and cooking purposes. Vendors provide the natural gas when the customer pays for the order up front. Generally, this type of prepaid plan for natural gas is available in rural areas rather than in cities or towns.

When it comes to a prepaid cell service plan, the actual rate per minute charged is often higher than on subscription plans that offer a bank of minutes each month for one low price. However, for someone who has credit issues or who simply does not use cellular services very often, going with a prepaid service plan can be the ideal approach. Anyone on a tight budget can carefully monitor his or her usage and make sure they do not exceed the amount set aside to purchase minutes in any give month. Low volume users can sometimes purchase a small amount of minutes and have no more cell phone expenses for two to four months.

Selecting the right prepaid service plan can take some time. As more providers have begun to offer cellular and other services using a prepaid platform, the competition for these services has increased significantly. This has led to some pay as you go vendors offering incentives to attract and retain customers, while others have simply lowered the rate per minute they charge customers. Because the service plan contracts required with prepaid services tend to be open-ended, a customer can always switch vendors with no fear of paying penalties for going with a different vendor. This means that prepaid services usually rely on a combination of quality service and good rates to keep growing.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By jessicabolir — On Feb 08, 2013

People can buy pinless phone cards that will allow you to call from anywhere in the world, and pay for how much they talk.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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