A "pay as you go" cell phone plan is one in which some amount of credit must be purchased before the phone is used. This credit can be used until it expires or runs out, at which point the phone owner must buy more. In most cases, this type of plan can be paid for upfront with any kind of payment, and the credit can often be used for texting and using the Web as well as for voice calls. There are many advantages and disadvantages to using a pay as you go plan, which may vary depending on the user's viewpoint. For example, some users may not like the idea of having to renew their credit regularly, but others prefer that control over their expenditures.
How Pay as You Go Plans Work
Pay as you go plans work differently from most standard phone plans. For starters, there is no monthly fee or annual contract. Instead, in most plans, a phone and certain amount of credit — usually some set amount, such as $25 or $50 US Dollars (USD) — can be purchased from the carrier, an electronics store, a discount department store, or other vendors. Credit is used to make calls, and the per-minute rate may vary depending on when the calls are made. Additional credit can be bought at many grocery and convenience stores or through the phone or online from the carrier.
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Some pay as you go plans are available with unlimited calling minutes for a daily fee. Each day that the phone is used, this fee is deducted from the pre-paid credit. Calls made on such a plan can typically be made at any time of day, with no difference in how much credit is required; in other words, while some plans may charge more per minute for calls made during business hours, an unlimited plan usually charges only the flat fee. Some plans include unlimited texting and web browsing as well.
As calls are made or credits are used in other ways, those credits are deducted from the available balance. If the balance reaches zero, more minutes will need to be purchased to make or receive additional calls. This is why it is called "pay as you go."
For most plans, users must pay a minimum amount periodically — often every 30 or 90 days — to keep their phone activated and phone number current. If the user does not keep the account active, the phone may no longer be able to make or receive calls, and the number may be disconnected, even if the user still had credit. As long as the required amount of new credit is purchased, the existing balance usually accumulates, so credit will typically not be lost if it is not used. Users may have the option of registering a credit card with the carrier to automatically debit it as required to save the trouble of remembering to renew. Otherwise, users can "top off" the account anytime by purchasing more credits.
Many phones for these plans are quite simple, and can include flip phones with large buttons and phones may or may not have a camera and texting abilities. Some plans offer smart phones that for allow texting, surfing the Internet, taking photos, and other features. Convenience features such as voicemail, caller ID, and call forwarding are typically all available with these phones.
Cell phones from carriers that operate on the GSM standard include SIM cards, which are small integrated circuits that store all of the phone's information. The owner's cell phone number, minutes, and other information is tied to the card — not the phone. With pay as you go plans from these carriers, the SIM card can be removed from one phone and inserted into another compatible phone from the same carrier or an unlocked phone that is not tied to any specific carrier, allowing the service to be transferred easily.
Advantages of Standard Plans
In the US, standard cell phone plans usually involve a mandatory contract of one to two years, a credit card, credit check, and a minimum monthly fee. Many plans include free weekends and evening calling, meaning calls made during this time do not count toward each month's allotted minutes. Options like free calling to any other mobile phone that uses the same service or free calling to certain cell numbers on other services may also be available. These plans are best for people who use their phones for more than 90 minutes each month, as the per-minute charge is usually less expensive than with pay as you go plans. Phones available with these plans are usually the latest ones on the market.
Advantages of Pay as You Go
Unlike standard plans, a pay as you go plan does not require a contract. In addition there are no credit card requirements and no monthly fees in addition to the cost of credit. Free weekends and evenings might be offered for short periods of time as promotional campaigns, but as a general rule these plans tend to be very straightforward.
These plans are popular people who only use their cell phones occasionally and therefore don't need the expense of a standard plan. They are also useful for people who don't have credit cards or who have varying income and can't always afford a regular monthly payment. Other users don't want to be tied to one carrier for a long time, as is usually required by a contract, and want to freedom to try out different plans without paying early termination fees.
Disadvantages of Pay as You Go
The per-minute rate of a pay as you go plan is typically more expensive than with many traditional cell phone plans. Also, there are often fewer plan perks, such as calling other people with the same carrier for free. Phones for the cheapest plans usually have few options to them, so texting and Web surfing may not be available. Just like any plan, users should read the fine print for extra service charges, including for roaming and international calls.
As credit expires usually every one to three months, users need to keep track of it or risk losing their phone service as well as their cell phone number. This can be a particular problem for those who don't use their cell phones frequently.