In the US, postpaid cell phone plans have been the dominant type until recently. Prepaid plans are now about half of plans in the US, after rising considerably from a low market share (formerly marketed mostly to people with bad credit, or as low cost plans for poor people).
But it seems that many of the postpaid plan “features” are the things that people do not like, such as two year lock-in, credit checks (and associated identity theft risk), surprise roaming and other charges, etc… In many other countries, prepaid plans are and have long been the norm. So even people other than the traditional users that prepaid plans are marketed to (i.e. people who have good credit and are not poor) could have found prepaid plans advantageous then and now.
What is the reason that about half of cell phone users stay with postpaid plans these days?
I think that your post would have made a lot of sense in, say, 2009 – but not really keeping up with the times.
Most of the major cell providers have been moving away from the practices you describe over the past several years— they are selling plans with unlimited services, no overage or roaming charges, and the lock-in contracts have been replaced with the option to finance the phones. The whole point of the 2-year contracts were that the companies were giving away the phones for free or deeply discounted – so now they’ve gone to the more transparent practice of reducing the monthly cost for data and phone service – and instead letting the people who can’t afford a brand new $800 phone opt into a financing agreement to pay $38 a month for 2 years, on top of the service. (But no one has to buy the phone )
With the advent of smart phones a lot of users want lots of data – unlimited these days – so they can use their phones to watch HD videos — and prepaid by definition come with a data cap. You’ve paid for X and when X runs out, the phone doesn’t work until you pay again – or if not (such as if you have a credit card linked to the phone plan) -then you end up with the same surprise extra charges when the system automatically charged for the excess use.
At this point I don’t see any advantage to pre-paid unless I wanted a burner phone for some reason – such as an extra phone I could give to a little kid who didn’t ordinarily have a phone for short term use - or something to give to a guest who was visiting from out of the country. Whatever unexpected tacked on charges that could come with postpaid are a thing of the past.
I’d just also mention that I make a point of paying my cellphone bill by credit card and time it for the next billing cycle of the credit card – so the bill I paid by a charge on February 5 for January usage will not come due for me to actually pay dollars for until around March 25th. Way back when there was this thing called “interest” that was paid on bank accounts, which meant that it was useful to leave cash sitting around for an extra couple of months. I hear that’s coming back in fashion. So at least for those of us with steady incomes and well-established credit, the pay-later system works just fine.
One more thing-- over the years there have been many times when I have been able to call up my provider and get them to waive some of those extra charges for various reasons – one advantage of post-paid is the ability to dispute a bill. I suppose with prepaid those charges woudn’t have been incurred in the first place… but sometimes its nice to have my cake and eat it too.
So the answer to your question is that post-paid works very well for a lot of us and if your data about market share is correct, it sounds about right.
There are prepaid unlimited data plans (prepay for a month of unlimited data). But most unlimited data plans (prepaid or postpaid) seem to have data throttling for very high users (some cell service companies have gotten bad press for having undisclosed or poorly disclosed data throttling).
For a family of 4, a postpaid plan can be cheaper - at least for us. Supposedly the postpaid plans also get prioritized on the network in times of congestion.
Hmm, so this got me to do a little checking and if we didn’t get a discount for our company, a Verizon family prepaid would be about the same, but with more data. May have to look into that. Although we never use all our data anyway because both kids have basically 100% wifi coverage at school.
We’ve been on prepaid for many years. I bought myself out of my old Verizon plan to go to Virgin Mobile because usage overages (at that time not unlimited but now are) didn’t result in huge fees like they did with VZ. Then I switched to Google Fi for a year or two, then to Metro PCS where we are now.
Currently have unlimited everything (including data), 2 lines for $80, 3 for $90, 4 for $100. Free nice phones too, unusual for prepaid. T-Mobile network so great coverage and the data speeds are comparable to or faster than my home wifi.
I think the competition from prepaid plans has forced the postpaid to stop doing contracts and lower their prices to compete. And still , they’re losing market share.
I have two kids on Virgin Mobile prepaid plans, $25. I have two other kids with Straight Talk at $35 a month with $100 iPhones bought to use with that plan. My phone is an iPhone that I bought through prepaid Virgin Mobile that cost me $42 a month for the same service my husband’s post paid Verizon work phone has (he doesn’t pay for his). When we bought my phone at Best Buy the salesman tried to tell me that my service coverage would not be the same as a post paid account. I am glad he was wrong! We go Up North a lot and I need to have coverage in the middle of nowhere.
I think the main reason people get into contracts is the “free” phone that they think they are getting and the upgrades every year or two. The guy selling me my last phone at Best Buy told me if I could get the same coverage as the postpaid account then everyone would do it. Not true. I don’t think any of my friends have prepaid phones like we do. They all have their families on $200+ monthly plans for 4 phones. Or worse. I recently got my youngest their first phones at the age of 14. They had to use their iPods to communicate with people up till then. My friends like their fancy phones, I could care less as long as it takes a picture and has decent memory.
Coverage areas could differ between different companies, and even different plans from the same company (often in the context of what roaming is allowed), though it would be greatly overgeneralizing to claim anything based on prepaid versus postpaid.
We are happy with our 4 lines of unthrottled data for $120/month, unlimited text, talk and data plus unlimited text and data internationally. We have no contract but we’re told we are grandfathered if it is ever changed.
A little known/disclosed difference (at least on AT&T) is that those with postpaid accounts can roam on towers of other companies via AT&T’s partner roaming agreements for better coverage, while those on prepaid plans are limited to only AT&T towers.
Grace period for payment. Prepaid usually shuts off the day payment expires
Roaming on other carriers, usually at no charge.
International roaming
Discounted equipment offers (e.g. BOGO)
Switching incentives
Financing of equipment
Larger sized family and business plans, may be cheaper for groups
More unlimited options
Postpaid disadvantages:
Higher costs
Taxes and fees
International calling usually more expensive without add-on
Credit checks
I actually had/have all those on my various prepaid plans, plus a truly free very nice phone ($200 value) with the most recent one. It let me unlock it after just 3-4 months too.
The main reason I switched from postpaid to prepaid way back when was when my kids went over their data/text allowances (remember when texts were limited?) and VZ hit me with HUGE overage fees for that. I liked that when they did that on the prepaid plan, they simply couldn’t use any more data that month (or it slowed way down), no cost to me.
There are a lot of people in American who have to get postpaid because they don’t have good enough credit to do otherwise. My students talk about this all the time.
We are just two people now and retired, often at home and so have Ooma- internet “landline” ($4 or so per month) with phones all over the house. Nicer than cell phones for talking, hearing the phone ring, answering for anyone in the house. Plus desktops and laptops/tablets (H is a computer junky) for high speed, big screen internet. And good car gps. For cell phones we pay a small fee, basically 10 cents a minute each person which amounts to typically $3 per month each. For vacations H gets a data plan by the week.
We do not need unlimited data or minutes, nor do we have four people to share a plan. Sure, we could easily afford the best phones and options but what a waste. Decent cell phones (upgraded last summer and don’t need to go outside for reception). For those of you who work and want to contact people when away from home or look things up or don’t have a good car gps other plans make more sense.