Prepaid vs Contract Cell Phone Plans Differences, Pros & Cons

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Sometimes, pay-as-you-go customers pay more for their calls, SMS and data than contract customers. In some cases they are limited in what they can do with their phone – calls to international or premium-rate telephone numbers may be blocked, and they may not be able to roam. Current models being deployed by wireless carriers are capable of setting the price points for all services on an individual basis (via packages), such that higher pricing is a marketing decision. One of the simplest ways to become more frugal is to find ways to save money on the things you already buy.

Do prepaid cards count for your credit score?

The history of prepaid mobile phones begins in the 1990s, when larger markets were being sought after by the mobile phone operators. Before this date, all mobile phone services were offered on a post-paid basis, which excluded people with poor credit. Prepaid phone providers like Mint Mobile have recently added roaming capabilities, so it’s becoming easier to save money on vacation as a prepaid user.

Postpaid customers at the major carriers can always expect to see the leading flagship available at their wireless provider. Increasingly, though, those same models are available from prepaid providers, too. The Galaxy S9, for example, is on sale at Boost, Cricket and MetroPCS (though there’s no option to buy in monthly installments).

  • Prepaid debit cards have major limitations compared with banking accounts and credit cards.
  • Among well-known MVNOs are Virgin Mobile, Boost Mobile (a Sprint subsidiary), TracFone (a subsidiary of American Móvil, a Latin American wireless provider) and AllTel Wireless.
  • SIM cards for various countries are available from Web sites such as, as are unlocked GSM cell phones.
  • Therefore, if you’re in the process of improving your credit score, you might find it difficult to get approved by certain carriers.

If you need to build credit or have been denied a bank account, a prepaid debit card might not be the best option. Secured credit cards help build credit, and if you can’t get a regular checking account, try second chance checking. These accounts provide another shot at mainstream banking and its perks.

Prepaid cards vs. credit cards or debit cards

Sometimes, prepaid cards are referred to as prepaid debit cards. This is largely to distinguish them from prepaid credit cards, also known as secured credit cards. These credit cards require an upfront cash deposit that acts as collateral when making purchases. In this article, we’ll be discussing prepaid debit cards, which are the most popular type of prepaid card used today. A prepaid debit card is an alternative to a bank account, and only lets you spend the money you load onto the card.

Go to the next page to learn more about international prepaid cell phones. Check out the next page to find out more about prepaid cell phones. There are plenty of advantages (and disadvantages, too) to using a prepaid phone, but the perk that drives most users to prepaid phones is the fact that there are no contracts and no credit checks. Prepaid phones are also an excellent way to manage the time spent on a cellphone, and that’s why many parents choose them for their children.

Many prepaid debit cards don’t require credit checks, so they’re easy to get. If you’re in one of the roughly 6 million U.S. households without access to a bank account, prepaid cards can be a solution to safely spend money without having to use a bank. One option is to buy a GSM phone to use at home and with SIM cards while traveling. ATT, for example, offers the Samsung A437 as a world phone through its GoPhone prepaid cell phone plans. But unless you have the phone unlocked to work with other cell phone providers, you’ll probably have to pay your company’s international roaming rates.

(Some MVNOs turn to multiple carriers.) So if Verizon’s network is particularly strong where you are, for example, MVNOs that use Verizon’s network for coverage will perform well, too. Just be aware that MVNOs can see their traffic slowed if a carrier’s network gets too crowded. A prepaid card is a card that you load cash onto in order to use as a form of payment. Prepaid cards are a safer and more convenient option to using cash, and you don’t need to have a bank account to use them. Traditional cell phone providers have done business mainly through long-term monthly contracts with customers. However, they also are stepping up and sweetening prepaid offerings to get a piece of this growing market.

Advantages and Disadvantages of No Contract Phone Plans

This is then deducted when the customer next adds more credit. Some businesses also say that prepaid cards are good for people who do not have a bank account. The businesses might say prepaid cards are a good way to manage your money. A prepaid card is also called a prepaid debit card, or a stored-value card.


With the ZEN Mastercard, for example, you can manage and monitor your balance through a mobile app. When you want to load money onto the card, you can do so using bank transfer, Visa, Mastercard, and Apple Pay or Google Pay. Prepaid cards work similarly to credit and debit cards, except they’re pre-loaded with a specific amount of money. When that balance has been spent, they can no longer be used to make purchases until more money has been added to the card.

Can you use a prepaid card abroad?

This can be confusing because both types of cards could show a card network logo, such as Visa, MasterCard, American Express, or Discover. When you use a credit card, you’re borrowing money, and you must repay it on the payment due date. Paying late generally means paying a late fee, and paying less than the full amount means paying interest charges. On the other hand, with a debit or prepaid card, you are withdrawing money you already have in your account. Unless you overdraw your account, you do not need to repay money or pay fees.

However, they’re usually as expensive or more expensive than a regular carrier’s plan. Prepaid cards may also come with fewer protections than your typical credit or debit card. The government has taken steps to provide legal rights for prepaid cardholders, like a pathway to reimbursement should you lose your card or have it stolen. But these protections may not measure up to those of traditional credit or debit cards.

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Plus, because the annual cost of phone plans steadily increases each year, you can find some major savings by switching to the right prepaid phone plan. You pay upfront for your monthly phone usage, deciding how many minutes, texts, and gigabytes (GB) of data you think you’ll use. When you run out, you have to wait until the next month for your minutes, texting, and data limits to refresh unless you buy more during the month to hold you over.

This makes the ZEN Mastercard an ideal prepaid card for travel. The content on Money Crashers is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change.

The prepaid service was sold to Metro Mobile in June 1989, and was implemented in November 1989. For more on MVNOs, read our guides to AT&T MVNOs, T-Mobile MVNOs and Verizon MVNOs — we’ll tell you which discount carriers use which parent networks. Check out the latest deals from Verizon cash flow forecasting on smartphones, accessories and more. For rates and fees of the Discover it® Secured Credit Card, click here. Bluebird by American Express even has family accounts, so you, as the primary account holder, can set limits on how much your kid(s) can spend and withdraw from ATMs.

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