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Posted May 4, 2009 | Copyright © The Northern Virginia Daily
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Pre-paid plans a fallback for families trying to cut expenses
By Josette Keelor -- firstname.lastname@example.org
When families are thinking about cutting costs, one of the first luxuries to go many times is the expensive cell phone plan.
The problem is that while microwave popcorn and a DVD rental for a family of four can replace a movie at the theater for an eighth of the cost, there are few alternatives to spending $110 per month for a family plan, short of tossing out the cell phone and relying on smoke signals to contact your friends and family.
In an attempt to address recent concern over high costs of phone plans, cell phone companies have begun offering pre-paid plans, a trend that representatives at Boost Mobile, a division of Sprint/Nextel, say has caught on like wildfire.
"It's a very profitable business," Shawn Glisson, a regional communications manager for Boost Mobile, said in a recent phone call. "I think at this time in particular ... prepaid phones are actually exceeding sales [of phone contracts.]"
The benefit of pre-paying or paying as you go, he said, is that customers can use their phones only as they need them and do not have to pay for time they are not using. With a contract plan, callers pay the same amount every month no matter how much they use their phones, often even paying more than anticipated if they use more minutes than their plan allows, not to mention they are locked into the plan for up to two years, depending on contract.
Pre-paid phones allow users to pay for one month, if they have the money, and then skip a month or two of service if finances are tight. They can leave the plan whenever they want to, without penalty.
The plan is great for people with questionable credit because no credit check is required for a pre-paid plan.
"Since you're paying in advance, we don't care what your credit is," Glisson said.
"People are seeking value," he said. "Customers in Virginia actually save quite a bit."
Glisson recommends pre-paid plans for people who do not use their phones a lot or those looking for savings.
Both reasons fueled Cheryl Davis' decision to purchase a Net10 phone more than a year and a half ago.
"The only thing I use it for is texting and phone calls," said Davis, of Strasburg. The mother of 2-year-old twin girls never had a cell phone plan before this one, but accepted the advice of her co-workers at Wal-Mart when they thought she should opt for a pre-paid plan.
"It was because I'm a mother, and I didn't feel comfortable on the road with the girls," she said. The phone would be mainly for emergencies.
"It's so much cheaper than a regular cell phone plan for me," she said. She pays 10 cents a minute no matter what, "which works for me because texting is the bulk of what I do," she said. On her plan, texting is much cheaper than making phone calls, costing her only half a credit (minute) per text.
"Everyone I know has a contract bill each month," she said, but she has no intention of switching plans.
Of course, pre-paid phone plans do not work for everyone.
"It's just too expensive," said Shayne Chafin, of Winchester, who currently has a pre-paid plan but intends on switching to a cheaper contract plan soon.
"I had a great phone, a great phone service ... and then I lost my job," said the single mother of three. "I could get a Tracfone for $20," she said, so she did, taking a hit from her former cell phone company, which charged her a cancellation fee for closing her account early. Still, it was cheaper than remaining with the plan until her contract was up.
Now she pays $10 for 60 minutes for her Tracfone Phone. Each page of texts she sends costs her a third of a minute.
"I'd recommend anyone getting it if it's not their primary phone," she said, but it does not suit her needs.
"If you just want to get a phone in an emergency, then it's not so bad," she said.
Boost Mobile offers three pre-paid plans. The Basic Pay-as-You-Go or "PayGo" plan charges 10 cents per minute anytime for calls and text messages and $1 a day for walkie-talkie service only on days when that feature is used. The caller can add money to the phone as needed. The Chat Plan costs $1 a day every day on the plan with unlimited night calling after 9 p.m. and 10 cents a minute for daytime calling. The Monthly Unlimited Plan costs $50 for the month and offers unlimited calling, texting and walkie-talkie service.
Those interested in the service can either purchase a phone from Boost Mobile or transfer their service to their phone if they already own a Nextel phone, and after that they simply pre-pay for however long they want the service.
"Everybody enjoys the savings," Glisson said. "We actually absorb all of the taxes [from a plan]," he said, explaining that the customer will not have to pay any hidden charges.
A downfall of prepaying is that the cost of the phone itself is not discounted. Because the customer can quit the service any time, rather than being locked into a yearlong contract, the company cannot subsidize the cost of the phone, Glisson said. For this reason, Glisson said Boost Mobile offers various types of phones with different abilities, with prices beginning under $30.
Chafin's mother, who also has a pre-paid phone, is more satisfied with the plan.
"It works quite well for her, because she is one of those people who uses her phone only ... about twice a month," Chafin said. If customers use their phones too infrequently, though, they can lose their minutes, she said, and ultimately their service. If the phone is inactive for three months, Chafin said it will deactivate.
"So that's a downfall too," she said.
Glisson confirmed that Boost Mobile has a similar policy, that if a customer stops prepay or after three months of not using the phone, regardless of how much money is on the account, the phone will deactivate. The customer then has another 60 days to add money to the account and/or begin using the phone again before the phone will be canceled completely and the phone number redistributed to another customer.
Chafin joked that she has such a backlog of minutes on her phone, if she stops paying now, she'll be OK on minutes until 2016.
"That part's nice," she said, later adding that she will see where her finances take her.
"Hope for the best on payday," she said.
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