At WiseGEEK, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.
Prepaid phone service is a payment option where customers pay for telephone services in advance. This is in contrast to telephone services where a contract is required and services are paid for on a recurring basis. While most forms of prepaid phone service are associated with cell phone usage, there are also landline services that are prepaid as well.
Unlike a standard service plan, prepaid phone service does not require signing any type of contract or committing to a minimum amount of usage in order to secure a good per minute price for telephony services. For example, a typical prepaid mobile phone service will require the subscriber to purchase a phone outright, then incrementally purchase blocks of call minutes for use. When and as needed, the subscriber purchases additional minutes. There are no monthly service charges and no additional fees to pay.
While cellular services are the most common form of prepaid phone service, there is a small and growing market for prepaid wired services as well. Local and regional companies in some parts of the world offer subscribers the chance to purchase their own landline phones and purchase blocks of minutes for use via the wired service. As with cellular services, it is the responsibility of the subscriber to purchase additional minutes before exhausting the current bank of minutes or possibly have to pay a reconnection charge along with purchasing additional minutes.
There are several good reasons for consider prepaid phone service. First, there is the matter of no long-term commitment. Unlike traditional plans, prepaid services require nothing more than purchasing minutes when needed in order to remain functional. This flexibility makes it possible for consumers who find the services of one provider to be substandard to easily switch to a different provider without incurring any penalties.
Next, a prepaid phone service allows the subscriber to take control of communication expenses. Because the user purchases call minutes in advance, it is possible to project the anticipated usage and purchase minutes accordingly. This can create a situation where budgeting the costs are no longer limited to a monthly format. For example, the subscriber may determine that it is feasible to purchase six months worth of minutes at one time and thus eliminate a monthly budget item altogether.
For people who extensively utilize landlines and cell phones during the course of a month, there is a good chance that the option of prepaid phone service is not cost-effective or convenient. Using a prepaid service would likely result in a higher monthly expense rather than lowering communication costs. However, people who consistently use a relatively low amount of phone minutes would do well to consider a prepaid plan. While the rate per minute may be higher than with contracted plans, the benefits of no contractual commitment and paying only for what is used often offsets the higher rate and actually saves the user money on a monthly basis.