5 things to know about prepaid phones

By: By The Associated Press
By: By The Associated Press

Even without much promotion, prepaid cellular phones are quietly gaining popularity as Americans examine their monthly costs in a deep economic downturn.

Rates are coming down, and prepaid is no longer just the domain of lower-income consumers.

Here are five things you should know when shopping for a prepaid phone plan:

1. SOME PLANS HAVE PRICEY FEES. Plans differ widely, so read the fine print carefully. Verizon Wireless, for example, has plans that charge subscribers $1.99 or $2.99 a day for every day they use the phone, in addition to charges for phone calls and text message. That could add up quickly. Verizon's basic prepaid plan charges 25 cents per minute of talk and 20 cents per text.

Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, says consumers need to confirm in advance what the per-minute rate is, if the calling area has any restrictions, and if there are any fees to reload your phone with additional minutes. All of these plan features can eat into potential savings.

2. LIMITED CHOICE OF EXTRA FEATURES. The selection of phones with special features is limited. You can still find prepaid phones with cameras, Bluetooth, Web browsing, GPS navigation and keyboards if you look. But spending more for those will limit your savings. This is about cutting bills significantly, not retaining a fancy phone as a status symbol.

3. GOOD OPTION FOR KIDS. Prepaid is an excellent option for people who want their children to have cell phones or want to put them on budgets. Kids can keep the phones turned off when they don't need them and still be able to call Mom and Dad without running up huge tabs.

4. NOT THE BEST FOR NONSTOP TALKERS/TEXTERS. You are charged for every minute you spend on a call and every text message sent or received, so this may not be the smartest choice for those with logorrhea (excessive talkativeness or wordiness).

5. GO ALL-IN ON PREPAID CELLULAR TO SAVE THE MOST. Evaluate whether you need a landline. If not, ditching your landline and switching to prepaid wireless could reap a windfall of savings. Or use your cell phone for outgoing calls and your landline for incoming, to save being charged when someone calls you.

(Copyright 2009 by The Associated Press. All Rights Reserved.)

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