Prepaid cell phones are mobile phones that are not associated with a long term contract and, therefore, do not incur the overage charges and late fees associate with contract plans. Prepaid cell phones are paid before the mobile service is activated on a monthly or “pay-as-you-go” basis and are deactivated when the service term expires if the customer does not add more money to his/her account.
What Are Contract Phones?
Contract phones are the most popular type of mobile phone and are associated with a long term contract. The company with which the customer has a phone contract charges him/her a monthly service fee and requires him/her to keep making payments for an extensive period of time, which is usually 12-24 months. Contract phones require the customer to make payments on a specific date and may charge him/her a late fee or overage charge if he/she fails to pay his/her bill on time or uses more minutes than his/her contract allows.
Prepaid Phones vs Contract Phones
Prepaid phones and contract phones differ in several ways. For example, prepaid phones allow the customer to pay in advance for the service and the prepaid phone company does not charge late fees or overage charges because the customer is only able to use what he/she already paid for. In contrast, contract phone companies charge customers after their service term has expired, on a monthly basis, and may charge the him/her for using additional services. Additionally, contract phones allow customers to receive a free phone along with the purchase of service and continue to receive a new phone every time he/she renews his/her contract, while prepaid phones require the customer to purchase a phone separately.