Compare Month To Month Versus Prepaid Wireless!
As the no contract wireless market has evolved, more and more people
have been increasingly confused over the difference between a postpaid
carrier offering, and prepaid wireless plans. And rightly so,
as the line between them has been greatly blurred. Here
everything you need to know to understand the differences, including
the pros and cons of each.
Postpaid providers by definition require
customers to sign a contract; usually two or three years.
allows them to offer you a subsidy on your phone purchase. In
other words, they can take hundreds of dollars off of the price of a
phone by locking you into a contract that guarantees that you won't
leave before they've had a chance to make back their money on the phone.
Most postpaid providers have long since allowed customers to buy an
unsubsidized phone (i.e. pay full price) to avoid signing a
contract. So instead of paying $100 or $200 (and often times
or nothing) for a phone you could pay the full price (ex. $400-$700+)
the phone. This is usually the same price you would pay if
want to upgrade your phone before the allowable period. While
this is an expensive up front cost, you then pay month-to-month, and
can cancel your service anytime without an Early Termination Fee (ETF).
Note, however, that postpaid carriers have been aggressively
phasing out phone subsidies in favor of straight financing or leasing.
This is a much lower financial risk and overall liability for
Prepaid wireless has the same effect of paying a higher price for the
phone upfront, while not having a contract. As people have
to have a greater desire to avoid signing contracts, it begs the
question, "What's the difference between postpaid month-to-month versus
prepaid?" Here I've listed some of the advantage and
disadvantages of each model:
Advantage Of Month-To-Month:
Disadvantage Of Month-To-Month:
- You typically get access to a much wider variety of
providers. They allow you to buy almost any phone they offer
contract, as long as you pay full price for the phone. On the
other hand, if you go prepaid with that same carrier, they usually have
a much more limited selection of phones. They do this as they
prefer that you sign a contract, so they don't want to provide the same
phones and value on their prepaid plans in order to give an edge to
their postpaid plans. This is obviously an artificial
differentiation that carriers create to promote what they believe is
the more profitable postpaid business.
- As you're still on a postpaid plan, you're still subject to
surprise overages! So if you go over your voice minutes or
data bucket, you'll be accumulating additional charges that you'll need
to pay on your next bill. With a prepaid plan, this is
impossible. You pay for particular service(s) and features
particular period of time. If a given feature is not
once you consume it, you'll need to pay to get more; you won't have any
Advantages of Prepaid:
- Postpaid carriers tend to charge additional fees,
surcharges, and taxes that most prepaid carriers include in the price
of their plan (which is overall lower than the equivalent postpaid
- Generally speaking you pay a lower per month cost for the
features you would get on a postpaid plan. Postpaid carriers
to pad the cost of the plan you're on to cover the cost of the Phone
Subsidy. So while the upfront cost of the phone may
inexpensive, and "all you have to do" is sign a contract, you're
ultimately paying for that phone over time, and usually the total net
cost is more than if you had just purchased it upfront. Also
noteworthy is that even though postpaid carriers are now decoupling the
plan from phone financing, and no longer subsidizing, the plan cost
itself is still priced higher than a prepaid plan.
Disadvantage of Prepaid:
- You can easily change between prepaid plan types (ex.
pay-as-you-go, monthly, monthly unlimited, or between different tiers
of monthly plans with different data buckets and features) without too
pain. To the contrary, changing plans with a postpaid carrier
mean an extension of your contract, or other fees and complications
moving between plans.
- Despite the fact that over time (ex. 1 to 2 years) you can
actually end up paying more for a phone on postpaid (due to the higher
plan cost), the upfront cost of a prepaid phone is almost always higher
as they have minimal or no subsidies. So while in the long
you're better off with prepaid, the upfront cost of a prepaid phone can
simply feel more expensive, or be financially more painful.
The implementation of Handset
Financing programs largely addresses that pain
point. Personally, I detest those programs, and
can read more about my opinion at that link!
- Fortunately, the previous objection around prepaid having a
lack luster phone lineup has completely evaporated over the years, so
this aspect is no longer an issue!
Below is a table summarizing the differences between postpaid
month-to-month versus prepaid wireless plans:
Greater variety of available phones |-
Subject to overages (i.e. surprise bills!)
- Higher monthly plan cost
- Higher overall phone cost (over 2-3 years)
Lower monthly plan cost
- Fixed monthly price (i.e. no overages!)
- Lower overall phone cost (over 2-3 years)
Higher upfront phone cost