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Right call? Prepaid plans can save cash

They may fit customers of traditional cell services who don't use all their minutes and who don't mind a few drawbacks.

August 26, 2007|James S. Granelli | Times Staff Writer

Prepaid calling on cellphones used to be expensive and even a bit embarrassing, because pay-as-you-go service was often aimed at deadbeats and those with little credit.
Now, thanks to companies such as Virgin Mobile and Boost Mobile, prepaid plans have been growing in popularity. Those who can easily afford the conventional monthly contracts are increasingly attracted to the simplicity of paying in advance -- and using all the minutes they paid for.
Prepaid plans can save you money, especially if you don't use a cellphone much or, if you do, you use it mostly to talk and send text messages.
Your calling habits will determine whether it's a good buy for you.
"Now, it's a lifestyle choice," said Don Girskis, general manager of Boost Mobile, a prepaid Sprint Nextel Corp. subsidiary catering to 4.3 million teens and young adults.
Prepaid calling has caught on among older customers as well. Virgin Mobile, which started out eight years ago targeting the youth market, now finds itself with more than half its 4.6 million customers over the age of 35, said Howard Handler, its chief marketing officer.
What's the attraction?

To start with, there are no contracts, termination fees, credit checks, bills, age minimums and usually no added taxes or hidden fees -- those costs typically are included in the flat pricing.

And there's no need to micromanage your minutes because, for most plans, you can't go over your allotted time. When your prepaid minutes are up, you can't make any more calls -- except for 911 -- until you buy more minutes. Carriers give you plenty of advance warning so you can enjoy uninterrupted service.

For Bruce Johnson of Dana Point, who had two cellphones from AT&T Inc.'s mobile unit, switching to a prepaid plan was a simple matter of economics.

"It wasn't the idea that I couldn't afford it," said the lawyer, who has turned in his shingle for stock market trading from his home. "It was the idea that when I sat down at the end of the month, I found I hardly used it."

The concept of using all the minutes you pay for is a compelling one.

"With postpaid plans, the average customer uses only 60% to 75% of their monthly minutes, and the rest is gone," said Kirk Parsons, wireless analyst at J.D. Power & Associates, a consumer research firm in Westlake Village.

For a common plan -- say, $40 for 450 minutes -- that means the average customer is paying 12 to 15 cents a minute, compared with the 8.9 cents a minute he would pay if he used all his allotted calling time.

By contrast, many prepaid plans offer rates as low as 10 cents a minute. In Southern California, Boost is testing a month's worth of unlimited talk time for those who pay $55 in advance.

But prepaid calling does have drawbacks.

For one, prepaid plans can expire. Providers require you to use the prepaid minutes within a certain period of time -- even up to a year for a larger bucket of minutes -- or they disappear. And they may require that you buy a minimum amount of minutes every month or two.

Those are sticking points for Jack Kutcher of Van Nuys, an actor who has avoided cellphones.

As inexpensive as prepaid plans can be for seldom use, he still would like to find one that lets him take however long he wants to use up all the minutes he buys.

"Why do I have to use the minutes or lose them?" he asked. "I only need a cellphone to carry in the car for emergencies."

There are other problems. Roaming and long-distance charges may apply if you make calls outside of your home region on some plans, like Boost Mobile's unlimited package. Handset choices are limited at some companies, and you usually pay full price for the devices because wireless providers don't often subsidize them the way they do when you agree to a typical two-year contract.

Customer service is weak at many prepaid calling firms, though the bigger ones have well-developed procedures. Virgin Mobile, for instance, consistently ranks among the highest in customer satisfaction surveys.

Another downside is that some prepaid plans charge access fees of as much as $1 a day just to use the phone, and that money is deducted from your upfront payment -- essentially taking away minutes from your account.

Finally, most companies don't offer all the services that would allow full use of smart phones and business devices such as Palm Treos and BlackBerrys.

But then, those aren't the majority of cellphone users.

"If you manage your plan right with a goal to control costs, prepaid could be a really great option," said Rosa Esquivel, AT&T's marketing director for Southern California. AT&T's GoPhone has eight prepaid options.

J.D. Power has found that, overall, customers pay nearly half as much on prepaid plans: an average of $37 a month compared with $65, including taxes, fees and surcharges, for post-paid service.

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