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How Do Prepaid Phone Plans Work? An Insider’s Guide…

What’s the deal with prepaid phone plans? How do prepaid phone plans work? Here’s everything you need to know about prepaid phone plans…



Switching to a prepaid phone plan can offer several benefits, whether you own your phone outright or are looking to save on monthly phone bills.

Though phone plans and data allowances may not be the most thrilling topics (I know, understatement of the century), a basic understanding of the INS and OUTS as well as the benefits of prepaid plans can help you save some extra cash.

And let’s face it, in inflation-spanked 2023, we could all do with a little extra cash in our bank accounts every month.

How Do Prepaid Phone Plans Actually Work?

how do prepaid phone plans workPin

In its simplest terms, a prepaid phone plan is one of two methods for securing data, calls, and text functionality for your phone, with the other being a postpaid plan.

Postpaid plans, which are usually more expensive and come with additional extras, are paid upfront every month and operate on fixed contracts, usually 12 or 24 months.

With a prepaid plan, you pay ONLY for the data you use (most prepaid plans come with unlimited calls and texts these days). The upshot of this is that you A) get more control over how much you spend per month, and B) you’re not locked into a contractual obligation to a carrier.

Here’s how prepaid plans work:

  • With a prepaid phone plan, you buy a specific amount of call minutes, text messages, and data in advance, which you can then use throughout the month.
  • When your balance runs low, you will need to add more funds to your account in order to continue using the service.
  • You can top up your account manually or automatically, depending on your carrier’s policies. Most carriers offer the convenience of automatic monthly top-ups, which can be set up via a wire transfer from your account.

In this respect, prepaid phone plans are very simple to live with and operate, so if you’re looking for a way to reduce your monthly phone bill, a prepaid plan could be just what the doctor ordered.

You can control exactly much you spend on a month-to-month basis, you’re not locked into any type of contract or obligation to the carrier, and you’re free to switch to another plan whenever you like.

What About Data Allowance?

Best prepaid phone plansPin

With most of the best prepaid phone plans on the market, data allowances aren’t too much of an issue. You can even get prepaid phone plans with unlimited data, although they’re a little more expensive – around $45 per month.

The key USP of prepaid phone plans for most users is how little they cost. You can pick up a plan with unlimited calls and texts and 10GB of data for as little as $15 per month.

All the best prepaid plans come with 5G too, so you’re not limited to older standards like 3G and 4G. And some, like VISIBLE’s excellent prepaid plan, gets you access to Verizon’s Ultra Wide-Band 5G network too.

Ironically, Verizon’s prepaid phone plans DO NOT include access to its Ultra Wide-Band 5G network. Go figure!

How Much Data Do You REALLY Need?

If you actually track how much data you currently use on a month-by-month basis, most people – including myself – will find that they seldom use anywhere near 10GB.

Whether you work from home or in an office in the city, you’ll spend the vast majority of your day connected to WiFi networks which means, in most cases, your internet connection is free.

The only time you’ll tap into your data allowances, therefore, is when you’re out and about and away from WiFi networks, either your home network or the one in your place of work.

And unless you like to watch Netflix in UHD for hours on end on your daily commute, you really don’t need THAT much data to get by. For the vast majority of users – like, upwards of 95% of people – 10GB or 15GB of data is all you’re ever going to need.

And if you don’t use anywhere near 10GB of data per month, why pay for unlimited data? It doesn’t make any sense, fiscally.

Plus, the difference between $15 per month for a plan and $85 per month is pretty significant, especially these days. And that, my friends, is why more and more people, myself included, have switched over to prepaid phone plans.

Here’s the best prepaid phone plans on the market right now, covering every possible budget and requirement.

Richard Goodwin

Richard Goodwin has been working as a tech journalist for over 10 years. He has written for Den of Geek, Fortean Times, IT PRO, PC Pro, ALPHR, and many other technology sites. He is the editor and owner of KnowYourMobile.

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