TechBite by Steve Bass: Newsletter #7

Understanding Prepaid

Experts Agree About Prepaid

True or false: Drug dealers and senior citizens are the biggest users of prepaid cell phones.

Nope, false on both counts.

But that's the impression I had, especially while watching the early episodes of The Wire, HBO's gritty show about drug dealing in Baltimore.

And I was convinced that only old people use prepaid phones, and then only in dire emergencies. Oh, yeah, another myth: Prepaids are rinky-dink, feature-challenged phones.

And those are just a few of the myths you'll hear (from an old person, by the way) about prepaid phones.

Understanding Prepaid

With a traditional postpaid plan, you get air time when you agree to pay a set amount each month. Prepaid, or pay-as-you-go, lets you buy air time only when you need it.

Most prepaid companies let you go online to refill your phone with air time, or if it's cheaper, pick up a refill card at many retailers. Either way, you choose the amount of minutes you want -- 60 minutes, say -- punch a bunch of numbers into the phone, and start talking.

Some companies, T-Mobile, for example, charge a low per minute fee yet sock it to you with a dollar-a-day fee for each day you use the phone. Others, such as TracFone, sell you air time with an expiration date (which, it turns out, is the cheapest way to go; more in a second).

If you're smart, and plan to use the service for a while, it's better to buy a year's worth of air time -- the price per minute will definitely be lower. Don't worry if you want to switch phones -- most carriers will let you transfer the minutes to your new phone. In fact, I lost my phone recently (and darn it, I know it's around the house somewhere; ain't memory problems challenging?). TracFone made the transfer to my new phone in a few minutes.

Experts Agree About Prepaid

I've touted prepaid phones to anyone who'll listen. And just this week, two experts backed me up.

The New Millennium Research Council, a nonprofit based in Washington, D.C., released a report revealing that of all cell phone users in the United States, fewer than 16 percent use prepaid phones. More significant, the report explains that fewer than half of all postpaid cell phone users use the allotted minutes they're paying for. These people would be perfect pay-as-you-go customers.

At the council's news conference, the first question I asked was who paid for the report and whether they had any interests within the prepaid cell phone industry. "Definitely not," said Graham Hueber, a senior researcher with the Opinion Research Center, the group that did the survey. He explained that he surveyed cell phone users only, not carriers.

According to the survey, here are the most popular myths about prepaid service:  

1. Switching to a prepaid cell phone is expensive because contract-based customers have to pay a cancellation fee whenever they switch carriers. 

2. Prepaid phones are good only for people who rarely, if ever, use their cell phones.

3. A postpaid cell phone customer with an "unlimited" calling plan is always going to pay less than a prepaid customer who pays by the minute.

4. Prepaid phones are available only in very basic models.

Coincidentally, in the January 2009 issue Consumer Reports outlined tips for buying a prepaid service, a must-read article for any of you with a postpaid service and thinking of switching.

TracFone, My One and Only

There are easily 30 carriers offering prepaid phone service, including VirginT-Mobile, and Net10. Check Prepaid Reviews, a site listing 26 companies; the reviews seem fair and detailed, and you' can to link directly to the vendors.

In fact, one of my tech editors, Carey Holzman, wrote with his own review:  

"My sister convinced me to use Virgin. What a huge mistake. Virgin advertises a 300 minute card for $30. It says 300 minutes on it. But you don't get 300 minutes unless you pay $6.05 a month and the phone doesn't display how many minutes you have left or the expiration date of the minutes, like we were used to with the Net10 phone.

"In my opinion, Virgin's pre-paid phone plans are tricky and mislead people into thinking they're getting a prepaid service for a good price only to discover they're really paying a lot more than other services."

After lots of due diligence, I chose TracFone. Both Judy and I have used TracFones for two years and we haven't had problems with either of the phones or the service.

TracFone's rates are cheap and it has neat phones, including many with cameras and Bluetooth capabilities.

My other annoyance with TracFone is when I need to add more air time and have to figure out which of the company's refill offers to choose. Maybe it's me, but I worry I'm not getting the best deal. I've solved that by putting the details of each "deal" in a spreadsheet and seeing which has the lowest per-minute charge. It inevitably is the longest plan: 800 minutes good for a year for $140, about 6 cents a minute.

So until another carrier can match that, I'm sticking with TracFone.

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