What is a Prepaid Cell Phone?

A prepaid cell phone is essentially exactly what it sounds like. It is a cell phone that does not require a monthly contract; rather, you place a set amount of money, or "minutes," on the phone and are then able to use the phone until the minutes run out. Prepaid mobile phones are an easy and convenient way to have a cell phone without the limitations of a contract.

In general, though you do not have a true contract, you will need to continue to add minutes to the phone. The minutes you add initially, and each time thereafter, will generally have a set period of time before they expire. Prepaid phone minutes generally last between 45 and 90 days. Sometimes, however, you can set up a "pay as you go" plan, where you will only be billed for the minutes you use in addition to a small monthly service fee. With either of these types of plans, minutes are fairly inexpensive.

There are numerous reasons that you might purchase a prepaid cell phone. These cell phones are great for kids and teens, because you are able to control the amount of the monthly bill. There won't be any surprises at the end of the month because your child went over the set limit of text messages or minutes. They are also great ways to teach your kids about responsibility with money, if you allow them to use their own money to reload the phone once the minutes run out.

Cell phone companies run credit checks before you are allowed to set up a contract plan. If you have poor credit, purchasing a prepaid cell phone is a good idea because no credit check is required. If you maintain your prepaid phone with a company, you may be able to sign up for a contract one day with them.

Most popular cell phone companies offer prepaid cell phone plans. It is best to research what company is most popular in your area, because then you will have access to the best reception. It can be a bit more expensive initially to purchase a prepaid cell phone, and here's why.

When you purchase a traditional cell phone from a company with a one- or two-year contract, a percentage of the price of the cell phone is usually offset by the cost of the contract. That means you can get a discount on the cell phone, or in some cases get the phone for free. But when you aren't signing up for a contract with a prepaid cell phone, the entire cost of the phone falls on you. Cell phone companies anticipate this, for the most part, and offer prepaid cell phones with less features, such as music players or cameras, for a less expensive price.