How Does a Prepaid Cell Phone Plan Work?

How Do the Plans Work?

Anyone can go to a cellular phone retailer and purchase a prepaid plan. Initiating the plan requires two purchases: a phone and a block of minutes. Most cell phone companies offer a special selection of prepaid phones that allow users to input additional minutes or receive minute balances.

How are Minutes Added?

Users purchase cards with blocks of minutes. Users can enter an authorization code into the phone, which unlocks the minutes and adds them to the account. When the minutes run low, a message is typically sent to the phone that reminds the user to add more minutes.

Contract and Prepaid Plans

The clear difference between a contract plan and prepaid is how users pay for the service. Contract plans lock in a monthly rate for quantity of minutes. Prepaid plans are pay-per-use, debiting minutes as they are used. Prepaid plans also require no credit check in order to qualify. Phones and minutes can be purchased off the shelf at cell phone or discount stores like Wal-Mart or Target.