How Prepaid Smartphones Just Might Take Over the Cellular Industry

We’re addicted to our smartphones, and the cellular industry knows it. The big players in the business are charging an arm and a leg – and another leg – for cellphone plans, and they’re even ensuring that unlimited texting and voice comes standard on postpaid plans (Check out Verizon’s Share Everything plans) because both features are becoming less relevant with today’s tech (consider iMessage on the iPhone). The budget-conscious among us are looking for alternatives, and with unemployment still lingering at sky-high levels, prepaid plans are starting to find their market.

What’s Prepaid?

Today’s prepaid plans are typically lower-priced than postpaid plans – the factor that attracts most to this soon-to-be-popular alternative. As evidenced by the comments on a recent article, people who are serious about saving money on their cellphone bill switch to prepaid.

Prepaid is just what it sounds like: you pay for your cellphone service before you receive it. Postpaid, in contrast, has you pay for service after you’ve received it.

Companies like AT&T are realizing that prepaid customers are looking for the most bang for their buck, and are starting to offer some great deals on prepaid (but notice how difficult it is to find prepaid on their website). By no means, these plans are not displayed front and center, but they do exist.

Many prepaid plans include voice, text, and data for between $30 and $50 per line. You’d be lucky to find a postpaid plan with similar features for under $70. Why is this the case?

Postpaid Plans Add Subsidies on Smartphones

The main reason you’ll pay more on postpaid plans than on prepaid plans is because so many postpaid plans offer phones for less money. The cellphone company will actually eat some of the cost of phones they sell in order to get you on a higher rate plan – and they need you to pay for your phone discount over time. For those who can’t cough up $400 or more for a smartphone, postpaid plans make up for the savings on smartphones by charging them more on a monthly basis.

The problem with this is that many customers don’t upgrade (or change phones) every two years, so the higher monthly bill ends up taking more money out of their wallets than is needed. This is where the big players in the cellular industry make a lot of money.

Why You Should Consider Prepaid

There are a number of reasons I believe prepaid smartphones will overtake the industry over the next few years and why you should give prepaid a look. Let’s start with some typical benefits:

• Lower monthly cost (as mentioned before)
• No gotcha cellphone fees you’d find on postpaid plans
• No contract (if you want to move to a different carrier, go ahead, but be prepared to possibly pay for a new compatible smartphone)
• No credit checks.

Virgin Mobile just announced a new plan for the iPhone 4 and iPhone 4S that only costs $30 per month (with a $5 discount when auto-pay is selected). It includes unlimited data (up to 2.5GB of high speed, lower speed after), unlimited texting, and 300 voice minutes. For those of us who do very little talking and a lot of data, this is a great deal. Sure, it’s on Sprint’s slow 3G network, but aren’t many of us on WiFi anyway?

Again, remember that prepaid plans don’t discount the cost of phones, so the iPhone 4S would cost you nearly $650 in this case. If you’re a saver though, this shouldn’t be a problem. Besides, you’ll make up the cost difference very quickly.

Why Prepaid Smartphones Will Rule

Customers like simplicity. Customers like straightforward pricing. Customers want freedom to pay for what they need without wasting extra money. That’s where prepaid comes in.

As the frugal community grows, so will the prepaid industry. I’m starting to believe that these plans will be mainstream in less than a decade. I could be wrong, but meanwhile, you should probably rethink your smartphone expenses – you’re probably paying too much money!

Agree? Disagree? Leave your thoughts in the comments below! I’ll meet you there – from my iOS WordPress app.