Pay as You Go Vs. Contract Plans
When you sign up for cellphone service you have two main options. You can sign a contract for ongoing service or establish a pay-as-you-go arrangement. Explore the basic differences, benefits and disadvantages of getting a pay-as-you-go plan as opposed to a contract plan from a cellphone company.
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Pay as You Go
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A pay-as-you-go cellphone plan is sometimes called a prepaid plan. You must purchase cellphone minute credits to continue to use the phone. With a pay-as-you-go plan, you can usually use an unlocked cell phone (not assigned to one specific cell phone provider). These plans are common for people who have troubled credit; pay-as-you-go providers do not require a credit check in order to use the mobile account.
Contract Plan
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A contract plan for a cellphone is one that allows you to use a cellphone under an agreement for a certain number of months or years. The common contract length is one or two years. The cell phone service provides a certain number of included minutes each monthly billing cycle. Contract plan providers often offer discounts on phones as well as upgrade discounts for extending the agreement.
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Compare Benefits
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When you sign up for a pay-as-you-go plan, you don't have to worry about living up to a contractual agreement with the cellphone company. You can leave the company any time you like. Also, with a pay-as-you-go plan you can monitor your cellphone usage and expenditures more closely --- once the minutes run out, you won't pay expensive overage fees. Conversely, a contract plan usually comes with a cheaper per-minute rate for phones and you do not have to worry about losing service when the minutes run out. Contract phones also offer inexpensive packages for text messaging and data usage compared to pay-as-you-go plans.
Consider Disadvantages
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Many cellphone providers charge expensive termination fees if you're signed up for a contract plan and decide to cancel before the end of the agreement. Compare the risk of early termination fees to the more expensive per-minute cost associated with pay-as-you-go plans. Also with a pay-as-you-go plan, if the cellphone loaded with the prepaid code is lost or stolen you lose those minutes and have to purchase new minutes in addition to the phone. While you maintain your minutes if you lose a contract phone, you have fewer options for affordably replacing the device compared to a pay-as-you-go plan, which usually works on a wide variety of inexpensive phones.
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