Phones: Why prepaid is (still) best

Smart cellphone customers use prepaid plans. These plans offer better value than traditional postpaid plans. Most such plans work the same way — you just pay before the month’s service instead of after.

Nexus 4The very best deals are for consumers who pay up-front for unlocked phones and then buy a prepaid plan. Just slip in the SIM card and you’re in business. Because the carrier hasn’t subsidized the cost of your new phone, it doesn’t have to build in monthly charges to recover that cost. (Do the math and you’ll find a “free” phone is very costly by the time you’re done with a two-year contract paying for it.)

For the past few years, the very best deal of all was to buy an unlocked Google phone that used the “GSM” standard — because AT&T, T-Mobile and foreign carriers all supported GSM. You could switch from AT&T to T-Mobile and back just by changing SIM cards. Instead of a monthly charge, you could have a pay-as-you-go plan and save even more money — especially if you spend most of your time around free Wi-Fi networks. One excellent plan by AT&T’s GoPhone charged $5 for 50 megabytes a month. That’s not much data but it’s enough for a cautious user who’s around Wi-Fi a lot.

That plan is no longer available, but there is a $25 per month plan that offers 50 megabytes of data per month for $5. It competes directly with T-Mobile’s $30 per month plan. There are differences in the included voice minutes and messaging, so check both plans if you’re thinking of going this route.

In my family, we have two T-Mobile prepaid plans, one Tracfone and one GoPhone plan on a Nexus phone. The beauty of an unlocked phone like the Nexus is that you can go get a compatible (T-Mobile or AT&T) SIM card for it and switch carriers just that easily.

Summary: Prepaid service with unlocked phones is the best; with an unlocked phone you can easily go to another carrier.