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How Much Money Can You Save By Switching to Prepaid?

An overview of the amount of money that can be saved by switching to a pre-paid cell phone plan

In the United States there are the “big three” carriers, consisting of At&t, Verizon, and Sprint. These carriers force customers into a 2-year contract that is only breakable with heavy termination fees, which usually equate to paying out the rest of the contract all at once. T-Mobile has been the largest alternative to these companies over the past decade, but in recent years smaller alternatives have arrived on the market which give the “big three” a run for their money. The fact that people are moving away from the “traditional” contract mobile services is only perpetuated by T-Mobiles recent removal of all contract plans from its service.

Despite the news the pre-paid services are generating, it still leaves a few of the most important questions up for debate, namely:

  1. What’s the price difference on pre-paid?
  2. Is service reliable on pre-paid?
  3. What phones & features limitations are there on pre-paid?

This article is the first in a series of three where I’ll be reviewing each of these three questions. To start, let’s talk about pricing and review the pricing models for each carrier covering both the contract based pricing and pre-pad plan.

Before getting into a pre-paid discussion, there is one stigma that needs to be dealt with around Pre-Paid being a hassle and time consuming vs. a contract. This is bogus because Pre-paid accounts work pretty much exactly the same as a contract plan except it’s monthly vs. annually. The service can be hooked up to a debit or credit card with automatic renewal each month (unless it is told not to).

I would actually argue there are two distinct advantages going pre-paid vs. annual or bi-annual contract. The first is that billing is done at the beginning of the month and paid one month in advance. If the bill is not paid at the beginning of the month, service is simply turned off. There aren’t any collection agencies, late payment fees, or any other mumbo jumbo including late fees. Want the service turned back on, just make a payment. The second distinction with paying for pre-paid is that there are typically less fees and taxes added onto the regular monthly rate.

All prices shown below are reflective of 2 year periods. Plans listed are concerning devices specified as either Android or iPhone, we didn’t bother to include “basic” plans that don’t have any data.

Single Plans on Contract

AT&T

  • $1,680 – Unlimited minutes
  • $1,440 – 900 minutes
  • $960 – 450 minutes

AT&T Data Prices (additional to above prices):

  • $1,200 – 5GB
  • $720 – 3GB
  • $480 – 300MB

AT&T Other Add-ons (additional to above prices)

  • $480 – Unlimited text messages

Verizon

  • $2,880 – Unlimited minutes, unlimited text, 6GB data
    • $240 per each additional 2GB data
  • $960 – Unlimited minutes, unlimited text, 300MB data

Sprint

  • $2,640 – Unlimited everything
  • $2,160 – 900 minutes, unlimited text, unlimited data
  • $1,920 – 450 minutes, unlimited text, unlimited data

 

Family Plans on Contract

AT&T

  • $2,880– Unlimited minutes
    • $1200 per additional unlimited line
    • $240 per shared minute line
  • $2,640 – 2100 shared minutes
  • $2,160 – 1400 shared minutes
  • $1,680 – 700 minutes

AT&T Data Prices (additional to above prices):

  • $1,200 – 5GB
  • $720 – 3GB
  • $480 – 300MB

AT&T Other Add-ons (additional to above prices)

  • $720 – Unlimited text messages

Verizon

  • $3,600 – Unlimited talk, unlimited text, 4GB shared data
    • $240 per each additional 2GB data
    • $960 per each line, starting with third

Sprint

  • $5,040 – Unlimited everything
    • $2,400 each for 3rd and further additional lines
  • $4,560 – 3000 minutes each, unlimited text, unlimited data
    • $720 each for 3rd and further additional lines
  • $3,600 – 1500 minutes each, unlimited text, unlimited data
    • $720 each for 3rd and further additional lines

 

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Prepaid Plans

AT&T, Verizon, & Sprint

While the prepaid versions for the larger carriers is somewhat improved over their contract rates, they are still priced poorly enough that I don’t think they are worth mentioning.

T-Mobile

T-Mobile has recently done away with plan contracts. That means every plan available from the company will be pre-paid. Keep in mind that the company still does technology contracts, which offers you a low-upfront fee for an expensive phone with the remainder slowly paid off over 2 years.

T-Mobile Single plan

  • $1,200 – Unlimited voice, unlimited text, 500MB data
    • $480 to add unlimited data
    • $240 to add 2GB data
  • $720 – 100 minutes, unlimited text, unlimited data (5GB speed throttling

T-Mobile Family Plan

  • $1,920 – Unlimited voice, unlimited text, 500MB data
        • $480 per line to add unlimited data
        • $240 per line to add 2GB data
        • $240 per additional line

Cricket

  • $1,200 – Unlimited voice, unlimited text, 1GB data
    • $360 for 1.5GB additional data

Boost

  • $1,140 – Unlimited voice, unlimited text, 2.5GB data

Virgin

  • $1,320 – Unlimited voice, unlimited text, 2.5GB data 3G / unlimited 4G
  • $1,080 – 1200 minutes, unlimited text, 2.5GB data 3G / unlimited 4G
  • $840 – 300 minutes, unlimited text, 2.5GB data 3G / unlimited 4G

MetroPCS

  • $1,440 – Unlimited everything
  • $1,200 – Unlimited voice, unlimited text, 2.5GB data
  • $960 – Unlimited voice, unlimited text, 500MB data
    • -$5 for all additional lines on same account

 

Averaging the cost over 2 years

Each plan and network give you plenty of options to choose from, so instead of creating a 10-page matrix of prices, we’ve gone through and averaged them out for each service provider.

Single Plan 2 line Family 3 line Family 4 line Family
AT&T $1,966 $3,860 $5,280 $5,920
Verizon $2,640 $3,840 $5,040 $6,000
Sprint $2,240 $4,400 $5,680 $6,900
Pre-paid $1,333 $2,666 $3,974 $5,282
Difference between Prepaid & Contract $633 to $1,307 $1,174 to $1,734 $1,066 to $1,706 $718 to $1,618

After looking at the numbers, it becomes apparent the price per line varies greatly for contracts, but remains mostly consistent for prepaid plans. In the worst case scenario with an Android phone, you can save $633 annually while the best case scenario would be a savings of $1,734 over two years. This doesn’t take into account that some customers may opt for a minimalist account, like myself, which only costs $600 per line over two years on pre-paid. In my case the difference is a minimum of $1,320 compared to the lowest comparable contract plan, or $2,040 compared to the highest.

What can someone do with an extra $633 to $1,734? Well, for starters it is possible to buy the best phone(s) on the market outright. This allows a person to later sell the phone and upgrade as new phones are released. Being on prepaid also means that if a customer isn’t satisfied with a provider, they can simply cancel service. T-Mobile even goes as far as to offer the phone at a very cheap price upfront, and then it just tacks on $14-$20 per month over 2 years until the full price of the phone.*

*Note that in the case of the iPhone 5, T-Mobile’s asking price of $99 and its $20 per month technology contract for the iPhone ended up being $70 cheaper than buying the phone directly from Apple.

contracts are not groovy at all

In Answer to This Question

By switching to pre-paid, mobile customers will save at least $600 over two years. Depending on what plan you’re switching from and what pre-paid provider you choose, the savings could be upwards of $2,040 or more. Any questions?

7 Responses to How Much Money Can You Save By Switching to Prepaid?

  1. Brian Burgess June 6, 2013 at 1:58 pm #

    I always have done prepaid since I can remember. It’s a lot more appealing now because there are some nice smartphones being offered … like iPhone and Samsung Galaxy S devices.

    • Steve Krause June 6, 2013 at 4:44 pm #

      Ya know what…. I know it will save me cash but I’m just lazy and never actually just cancelled my AT&T plan and signed up for month-to-month……

      Calling AT&T now.

  2. Z. Jorge June 13, 2013 at 8:27 am #

    I am not sure how you came up with the figures for the plan. I have Sprint Family plan, as you refer to it above:
    $3,600 – 1500 minutes each, unlimited text, unlimited data
    $720 each for 3rd and further additional lines

    My two year cost with four lines is a little over $5,000 or $2,500 per year. Something does not add up correctly. Just thought I mention that.
    Thanks.

    • Steve Krause June 14, 2013 at 12:45 pm #

      Austin — how current is your data?

      Z. Jorge — Just hit the Sprint website and yes, 4 lines on the 1500 minute plan is a little over $5k for 2 years.

      Wow…. Still, that’s a lot of cash.

      • Austin Krause June 17, 2013 at 8:24 am #

        Yup. There are additional fees that are being accounted for.

        Sprint charges an additional $99 per month for lines 3 & 4 if you are on the unlimited plan.
        That’s about an extra $4800 over two years…

        So for unlimited data on Sprint with 4 lines the cost is around 9,440. The costs in the table above are averaged out between that and lower data/minute plans available with Sprint.

    • Austin Krause June 17, 2013 at 8:29 am #

      This is for the unlimited plan which is $5,040 for just two lines.

      An additional $2,400 is tacked on per additional smartphone on the plan.

      This brings the cost for 4 lines up to $9,440.

  3. Ralph October 20, 2013 at 6:24 am #

    T-mobile network isn’t very good outside major cities, and the rest of the alternatives are even worse.




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