Stock investing for dummies – Prepaid vs. Contract Cell Phone Plans: Which Is Better?

Stock investing for dummies

In determining which type of cell phone plan to settle on, you will have to take into account what you will be using the phone for.

If your needs are fairly simple and you only need to use your phone for daily calls to your family and loved ones and nothing more, a prepaid phone, which by their nature tend to be cheaper, might be the way to go.​

On the other hand, if you run a side hustle from your phone doing something like driving for Uber​ or delivering packages via Amazon Flex, you might very well need a robust cell phone plan. In this case a contract cell phone plan which comes with unlimited data, talk and text might be your solution. 

If you are not a social media enthusiast, hardly play video games on your phone or surf the internet with your phone, staying with a cheap cell phone plan always makes sense (especially if you’re trying to achieve F.I.R.E.).

However, if you are in a place where you really need to cut expenses so that you can pay off debt or save money for the future yet you still enjoy all the additional features that come with having a more expensive plan.​

If you can genuinely answer positively to that question or wouldn’t miss those features should you forfeit them, you are ready to opt for a cheaper and likely prepaid plan.

The Stress of Contracts​

For those old enough to remember, it used to be that cell phone companies to protect their profits would have you sign a 2-year contract to be on their service. Canceling your contract before it was up meant a hefty $150- $200 fine.

If you did not like your phone or the service, too bad. You were stuck with it until your contract was up to upgrade your phone (without paying an expensive price for a new one ) or switch cell phone companies entirely. (Those days seem like the dark ages now, don’t they ?)

Companies like T-Mobile, MetroPCS, and TING have since made their millions by convincing us that going contract​-free is a great thing.

All kinds of hilarious ads have been made to that effect.

So if you absolutely detest contracts and would rather have the flexibility to change phones whenever you want or be able to switch cell phone companies, choosing a prepaid cell phone plan is the better choice.

The Cost​ For Prepaid Cell Phone Plans

Last but not least, let’s consider the actual costs per month and over the course of a year when you compare a prepaid cell phone plan to a contract plan.

Are prepaid cell phones actually cheaper ?

Let’s take a look at a handful of the top prepaid cell phone companies that offer you at least 5GB of data each month. 


$55 for up to 6GB of data after which internet speed will slow down. Check out T-mobile prepaid phone plans here.


$40 flat for up to 6GB of data after​ which internet speeds will slow down. Check out MetroPCS prepaid plans here.

Boost Mobile

$50 for unlimited 4G LTE data and free unlimited calling to Mexico. Check out Boost Mobile prepaid plans here.


$50 for 8GB 4G LTE data. Check out Cricket Wireless prepaid plans here. 

Republic Wireless​

$60 for 6GB data. Check out Republic Wireless prepaid plans here. 


​Ting does not really have “plans” like all the other companies. They have “levels” where you pay for what you use in a month. The “level” that includes a data plan of 5GB of data is $50+

So on average for a prepaid plan that offers you talk, text and data of at least 5GB (the average amount of data cell phone users will use in a month), you are looking at a payment of $50 monthly.

Taxes and additional fees are usually included in this cost so there are no extra monthly surprises. Also with prepaid networks you can bring your own device or purchase a device outright (although some like MetroPCS do have deep discounts going on all year round for phones).

There are even smaller plans if you want to go a little lower and still get good service.

​The Cost For Contract Cell Phones

Now let’s compare this with their biggest contract counterparts. For a full list of the best cell phone plans, check this out.


​Mobile Share Advantage Plan starts at $60 for 6GB. However this does not include taxes and fees and if you purchase a phone from them you have the opportunity to put zero down and split the payment for the phone into smaller payments over several months.

So in reality, your monthly bill could be closer to $100.


Verizon has plans for $70 for 8GB of data. Taxes and fees are additional plus there is a $20 device payment for smartphones. Here too, the monthly payment is more likely to be closer to $100.

And so overall, as you can see you are likely to pay more on a contract cell phone plan as compared to a prepaid plan.

When Are Contract Plans Cheaper?

In most instances getting on a large family plan will tend to be at par in price with prepaid plans. If you have a large family or a group of friends willing to go in on it with you, then you could negotiate a good deal even on a contract.

Closing Thoughts

In conclusion, choosing the most suitable cell phone plan comes down to what is suitable for your lifestyle and plans.

If we have to argue, however, on price for value alone, prepaid cell phone plans will always win out.

What has your experience been with contract plans vs prepaid ones? Your thoughts are welcome in the comments.

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