How Prepaid Cell Phones Work

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    How Prepaid Cell Phones Work

    • Prepaid cell phones allow you to pay in advance for the communication service the provider gives you. You can utilize its services in one of two ways:

      1. Buying "scratch cards" in certain dollar amounts and loading them onto your account by calling a phone number and entering the hidden number that is revealed upon scratching the card. After you do this, your account will be loaded with the amount of money or minutes that are advertised on the card. Every time you make a call, a reduction of cash or minutes are made to your account until the entire amount is gone, after which you need to reload the account in order to continue using the cell phone service.

      2. Simply send the provider a check or money order with enough money to pay for a certain amount of minutes at the beginning of each billing cycle. If you don't pay, you won't have service for that cycle. After this, the arrangement proceeds like the first arrangement. Your account will be loaded with the amount of money or minutes that are advertised on the card. Every time you make a call, a reduction of cash or minutes are made to your account until the entire amount is gone, after which you need to reload the account in order to continue using the cell phone service.

      Rather than use the term "prepaid cell phone," this service is also marketed as "pay as you go" cell phone billing, but the two basically mean the same thing.

    Benefits of a Prepaid Cell Phone

    • The beauty of a prepaid cell phone is that it frees you from the contract you would have to sign with a traditional cell phone billing arrangement. Once you enter into this type of cell phone contract, you have to continue paying even if you dislike the service or no longer want a cell phone. If you quit paying, you will face a hefty fine.

      Another benefit is that you don't have to pay a deposit with a prepaid cell phone arrangement, as you might with a traditional arrangement. This is great for people with bad credit who may find themselves paying $200 to $500 up front in order to get a cell phone. Plus, there is usually no credit check for a prepaid arrangement.

    Drawbacks of a Prepaid Cell Phone

    • The downside to prepaid cell phone services is that they tend to be more expensive than traditional services and they expose you to the risk of running out of credit just when you need to make a call---like when in an emergency situation. When the credit runs out, there is no way to make a call until you reload your account.

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