In the U.S. cell phone contracts are the norm, with customers being tied to a year or more contract paid on a monthly basis. The theory behind contracts is that by being a consistent customer the company can offer you better rates. Thus, as a contract customer you should pay less than someone who uses pay as you go.
However, in Europe especially, pay as you go cell phones are becoming an increasingly popular option, and it’s getting more common in the U.S. too. If contracts are meant to be cheaper, then why could this be?
People have chosen pay as you go for a variety of reasons for a long time now. One common reason is that they do not like to be bound to a contract which charges disconnection fees should they wish to cancel early. It can also be because of concerns over keeping up with payments. If a payment bounces because there isn’t enough money in your account when the payment is due then you’ll end up getting charged for both the contract charge and by the bank for the bounced payment.
Another common reason people choose to stick to pay as you go is that they can more easily manage their finances and control their spending if they have to top up their phone before they can use it. On the contrary, if you are on a contract and you go over your plan’s agreed limitations you will be charged without warning for the infringement.
Still, contracts have largely been the more popular choice as they save money. But now it seems this is changing, with pay as you go plans and prepaid cell phones beginning to fall below the contract prices offered by the same company. In comparing Virgin Mobile pay as you go and contract prices we see a clear example of this.
400 minutes on Virgin Mobile contract will cost you $49.99, but on pay as you go the cost is just $30. With figures like these you no longer need to consider which is more cost effective. It seems pay as you go is a contender for the mantle of all-round best option for mobile phone users.
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