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Pay As You Go Mobile Phones: A Practical Alternative to the Cell Phone Contract in These Tough Economic Times

Updated on July 12, 2011

Getting Creative With Your Cellular Contract

Pay as you go cell phones are not new, but it may be a good time for those who haven’t considered a prepaid cell phone in the past to do some research and possibly consider switching to such a plan.

To beat (or, should I say, survive ) this tough economy, it takes patience, perseverance, dedication and creativity. One way in which it can literally pay to be creative is to not only look for ways to increase income, but to look for ways to decrease the amount of dollars that are leaving your household every month. One creative measure that can be taken, depending on your and/or your family’s cellular phone usage patterns, is a pay as you go cellular plan.


Recent Growth in the Prepaid Cell Phone Market

Providers have been offering mobile phones with pay as you go usage plans since the early 1990s, but it was not until recently that such cellular phone plans started becoming popular to consumers in the United States (in Europe, prepaid plans have long been the plans of choice by consumers).

The ongoing recession and high rates of unemployment in the United States have turned the tide for the pay as you go mobile phone plan in the States.

According to Craig Moffett, a Sanford Bernstein equities analyst who was quoted in a CNET article, the first quarter of 2009 saw traditional cellular plan growth pretty much come to a standstill, whereas the prepaid cell phone market accounted for approximately 80 percent of cell phone subscriber growth.

Since then we have seen even higher unemployment and ongoing record foreclosures, accounting at least in part for the continued growth of the prepaid cellular market through 2010.

Why Consider a Pay as You Go Cellular Plan?

The reasons to consider switching to prepaid cellular plans in this economy are many. Pay as you go cell phones have many advantages over the more traditional cellular plans where the consumer signs a contract, typically for one or two years, with a cellular phone service provider and is then billed monthly for their cellular phone usage of the previous month.

For one, there is no credit check necessary to get a cell phone with a prepaid plan. For those who have lost their jobs and fallen behind on bills, or for those who have lost their homes to foreclosure, getting a traditional cellular phone may no longer be an option, at least for the short term. For those who fall into this category, pay as you go plans may be the perfect solution.

Secondly, a prepaid cellular plan can definitely save you money over a traditional cellular plan, particularly if you don’t use the phone very often. With a traditional cellular plan, if your monthly bill for unlimited calling is $65.00, you will be charged $65.00 even if you don’t make one call during the entire month. With a pay as you go plan cellular phone plan, you would be charged nothing during that same month.

These are just two advantages of having a prepaid cellular phone plan. Other advantages, some of which were cited by respondents in a Nielson survey, include not having to worry about a monthly bill, no contracts or early termination fees, no need to have a credit card in some cases (laws on this vary from state to state), simplicity, and a good option for teenagers, many of whom would talk forever with a traditional unlimited plan, but who have to learn to ration their talking minutes with a prepaid plan.

The main thing for those looking to switch to save money is to look at your cell phone usage patterns, decide how much of that is necessary and how much of it could be curbed, and then take a look at some prepaid plans to determine if switching will be a cost-saving measure. If so, make the switch and then have fun counting the cash you’ve saved!



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    • Mike's Corner profile image

      Mike's Corner 7 years ago from Maryland

      Haha -- yes, without a computer I suppose it would be hard to justify the $39 :)

    • Pixienot profile image

      Pixienot 7 years ago from Clarksville, Indiana

      Yes it is. I love Magic Jack and the connection quality is great. So far (and I've had it over a year) there is no downside to Magic Jack (unless, of course, if you do not have a computer)! :)

    • Mike's Corner profile image

      Mike's Corner 7 years ago from Maryland

      Great to hear that you have taken advantage of the prepaid cellular option, Pixienot. Hopefully more people will become aware of this option and the savings that it can bring.

      I've seen the Magic Jack commercials . . . that is an unbelievably inexpensive way to make calls!

    • Pixienot profile image

      Pixienot 7 years ago from Clarksville, Indiana

      Mike, you are so right. Last year we switched to TracPhone and have found that our cell bill is cut in thirds.

      We also invested in a Magic Jack system that plugs into the computer ($39). It cost us $19 a year to use the Magic Jack and we can make all of the long distance calls we wish; and talk as long as we like. We can also make local calls.

      With these two investments we have saved tons of money and been able to keep in touch with our other family that is not near by.

      Great hub! Good advice. Thank you!!