How You Can Save Over $1000 a Year Using Prepaid Cell Phone Plans

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How would you feel about an iPhone on a prepaid cell phone plan? It sounds like something that will never happen, but it appears this is simply not the case anymore. It looks like the iPhone is being sold by a few carriers that offer prepaid plans and they have been for a few years now, and it’s going to change the way that many people do their cell phone plans. This is a way that users can have the latest phones even without a contract or a big, expensive plan. How do you feel about that? Sounds pretty good, right? Well, we can tell you that it’s happening and it’s going to save you a lot of money. The first thing you have to do is get over the concept that having a prepaid plan is not something to be ashamed of. In a recent discussion with friends, one said that prepaid plans are only for people that cannot afford ‘real’ phones. I don’t have a prepaid plan (I’m a 14-year Verizon user), but I took a bit of offense to that. I don’t see it that way so much as I see it a very frugal way to use a phone. So once people get over that thought, they might be able to go ahead and see that this is a way that you can save over $1000 per year, which is a big deal.

Here is the deal; many phones are now being offered by these companies that offered prepaid plans, and they are considerably less expensive, but you have to understand how it works. It’s not nearly as cut and dried as a contract plan, so let me try to explain how it works and how you can save money. I’ll use my own cell phone plan in comparison to the newest Virgin Mobile iPhone plans. Virgin Mobile has three prepaid plans with an iPhone. You can pay between $30 and $50 per month for 300 minutes, 1200 minutes or unlimited minutes of phone talking (something few of us do at all, ever). So let’s assume that I would choose a prepaid plan that’s comparable to my Verizon plan. That means I’d pay $30 per month for very few minutes since I use my phone for data and text and few other things, per line. That’s a grand total of $360 per year for me to have a cell phone plan, and it would be $1440 for me to have the same four phones I have on my plan right now. Per year; that is it.

I currently have a plan with Verizon that has unlimited minutes (but I don’t use them) and texts and I have three other phones from family members on my line. Our monthly bill is $250. I’m paying $3000 per year to have a cell phone plan for four people – and we never use 300 minutes a month talking. I could switch us over right now and pay $1500+ per year less than I’m paying now.

But here is where things get a little bit complicated; prepaid plans make you pay upfront for your phones. This means you’re paying whatever the newest iPhone costs all at one time. That means paying $700+ for a new phone. But, you are still paying less over the course of a two year length of time. Let’s do the math.

I bought my new iPhone 6 with my two year contract for $299. By itself, the phone was something like $700. So I’d save $400 buying my phone with a contract, but I’m locked in for two years with no options unless I want to pay a hefty cancellation fee to break my contract. That means my plan right now cost me $1200 in phones at $299 a piece, and over the course of two years we will pay $6000 on our plan. That’s $7200 over the course of two years. If we had a prepaid plan at $30 a line for each of us for $120 per month and bought four $700 phones, we’d paid $2800 for phones up front, and another $2880 for our plan for 2 years. That’s $5680 for four full price iPhones and a prepaid plan that we’d keep for two years. This means that we would save $1520 over the course of two years on a prepaid contract plan. That’s big savings, and quite frankly I have no idea why I haven’t switched yet.

Of course, there are a few things to keep in mind; you’ll pay more if you get unlimited minutes. If you pay the $50 per month plan, you’re upping your bill by $80 per month on a 4-person contract or prepaid plan, which is going to cost you more over the course of two years. You have to stop and do the math and see what a new plan would mean for you in terms of saving money. If we talked on the phone, we’d need the unlimited prepaid contract, which would be more expensive for us.

Additionally, there are other things to consider. I’ve been with Verizon for 14 years. While everyone in my life switches their company every time they turn around, I don’t. I have service everywhere I go no matter what. Even when no one else can get service on their phones at my house, I have great service. It’s one of those things that I wouldn’t give up, and some prepaid plans do not use Verizon, which means my service would not be so good.

Here’s how to save over $1000 on a prepaid plan; do the math. Find out what you need and how to get it and then do the math. Consider what you’re getting versus giving up and find out if it’s worth it to you to go ahead and forgo what you have in favor of a prepaid plan. It might be; but it might not be, either.

Photo illustration by Justin Sullivan/Getty Images

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