8 minutes reading time
SEP 8 2022

Prepaid vs Postpaid: Which Is Better If You're on a Budget?

With the cost of living growing consistently, it’s no surprise that everyone is looking for ways to keep an eye on their outgoings. Whether you use your phone for personal or enterprise communications, phone budgets are no exception. The savvy consumer should be looking at their current offering and questioning whether the deal they have is the best one for them.

In this post, we’ll discuss how choosing between a prepaid and postpaid plan is central to answering this question.

Vector graphic showing a piggy bank, money and chart to suggest saving

What’s the Difference between a Prepaid and Postpaid Plan?

Prepaid and postpaid are the two types of plans the mobile phone industry offers its customers to pay their phone bills. Prepaid, as it suggests, requires the user to pay upfront for the services they need. In contrast, postpaid contracts see you pay at the end of the month.

It doesn’t, therefore, take a thorough examination of detailed data analytics for telco industry plans to determine that a postpaid plan will suit you better if you know you’ll struggle to pay your bill upfront.

The major difference between the two types of contract is as follows: With a prepaid plan, if you reach the limit of your allowance (let’s say to 10GB of data), you’ll no longer be able to use your mobile network to access more data unless you top up your allowance.

In contrast, on a postpaid plan, you’d still be able to use the mobile network to access more data but would simply pay for the data you use on top of your built-in allowance of 10GB.

While postpaid offers you more flexibility, this comes at a cost. The charges you run up can escalate quickly and mean that you’re left with a bill far exceeding the monthly price set when taking out the plan (this is known as bill shock).

This information alone might have already made your decision for you. Understanding your need for flexibility and your financial liquidity at the start and end of the month is paramount to ensuring you pick the right plan for you.

Graph showing the numbers of postpaid and prepaid customers at the big 3 US wireless carriers

Benefits of Prepaid Plans

Avoid any nasty surprises

The main selling point of prepaid plans for mobile phones is that you avoid bill shock because your payment is limited to the price of your plan. In 2022, most prepaid plans, like their postpaid counterparts, will come with unlimited texts and minutes.

What differentiates most plans from one another is the amount of data you receive within your allowance. That might be 10GB, 20GB, or more. The most expensive plans will provide unlimited data (albeit with a reasonable use clause).

Therefore, it’s important to be aware in advance of precisely how much and of which resources you’ll need from your phone plan. If you know that you only ever top out at 8GB of data per month, then a 10GB plan will provide you with the reassurance that you have all the data you need, and that you won’t exceed your budget.

This means that your flat fee of $15 per month (if that’s the deal you’re on) will always be $15, which is just as crucial for a consumer as it is for a business.

Great learning tool for teens

These days, teenagers and even younger children have their own mobile phones. Prepaid plans allow parents to keep a close check on their child’s phone use and the associated costs.

By selecting an appropriate plan, parents can rest assured that, unlike with a postpaid plan, their children aren’t going to rack up a huge bill at the end of the month. What’s more, providing children with a strict allowance, just as they would with a prepaid payment card, can help them develop healthy phone usage and spending habits.

A mother pointing her finger at her daughter who is using her mobile phone

Allow flexibility

While postpaid plans will lock you in for anywhere between 12-24 months, prepaid plans often go month by month, much like a cloud PBX system, offering the user or business much greater flexibility.

This makes prepaid plans a great option if you only require a phone for a short period. Depending on where you live and the country you are traveling to, they can be the best way to pay when you’re abroad and want to avoid expensive roaming charges—for example, buying a prepaid, contactless SIM card in the country you are visiting can be a safe and simple choice. It limits the threat of theft or fraud and can easily be recharged using vouchers.

This flexibility also allows you to take advantage of the best deals more regularly, allowing you the option to choose your own mobile device and ensure that you’re never paying over the odds for your plan.

Even businesses could benefit, as they may require more flexibility as they grow. For a company only just figuring out how to get a business license, having the flexibility that prepaid plans provide to their employees will be of real value.

Prepaid plans make it easier to budget as new business owners know exactly how much they need to allocate for their phones each month. And, as the business grows, so can the plan. Businesses can expand their prepaid plans in line with their growth.

Benefits of Postpaid Plans

No fear of running out

As we’ve established, just like when a prepaid card is declined, with a prepaid phone plan, you’re cut off at your allowance limit. Postpaid plans, however, don’t enforce the same cut-offs.

This is undoubtedly one of the reasons why most phone contracts are postpaid. There are no limits (calls, texts, or data) with postpaid plans, meaning that you can use your phone free in the knowledge that you will always be able to call, text, or surf the web at your own disposal. This brings peace of mind and avoids the annoyance of having to top up at a vital moment.

All you need to do is select a plan that will provide you with the inclusive services you need. As with prepaid options, data is the differentiator with most postpaid plans, so knowing how much data you use each month will allow you to select the right tariff for you.

Just as eSigning solutions provide you with full security over your signature, choosing a plan with a generous amount of data to cover your needs, along with some extra for emergencies, will give you the security you need to ensure you have enough to last the month. It’ll also minimize the risks of experiencing bill shock. Implementing this advice will eliminate the biggest headache that postpaid plans carry with them.

Having the latest phone

If having this year’s must-have phone is a priority for you, then postpaid contracts are often your best way of making this happen. The newest iPhones and their Android counterparts can cost over a thousand dollars, making them unattainable to many to buy outright. But, knowing you’re signing up for a long-term contract (12-24 months is most common), carriers will offset the phone's value across the contract's duration.

So, while you will incur a higher monthly tariff because you’re paying for the phone and the plan, choosing a postpaid rather than a prepaid package makes getting a state-of-the-art phone much more accessible. What’s more, depending on your chosen plan, you might not have to pay any down payment for the phone at all.

This could be of real use to business users who can’t rely solely on a virtual business phone number, as their employees need reliable handsets they can take with them on the road.

Just as you’d spread your workforce across a rotating shift schedule to make long working hours more manageable, spreading the cost of such expensive hardware can make purchasing phones for business use much more practical.

Another benefit to choosing postpaid plans is that mobile providers often incentivize customers to upgrade their handset early. This allows you to upgrade your phone annually, even if your mobile contract is for 24 or even 36 months.

people using mobile phones.png

Better perks

While prepaid offers better flexibility, choosing a postpaid plan will bring with it significant perks.

Most providers now offer loyalty programs and access to a range of services when you sign up for postpaid plans. This can include access to streaming platforms, cloud services, gaming apps, or money off by adding other services provided by the provider (e.g., home broadband).

These perks are only beneficial if they’re of value to you, so it’s worth shopping around the various carriers to see which perks you’d find most useful. When added up, the savings these provide can get close to offsetting the cost of the contract, thus ensuring real value for money.

Which Is Right for You?

Both prepaid and postpaid plans present real benefits, though prepaid can be the more flexible option, helping you avoid nasty surprises at the end of the month.

Before you confirm your next contract, you must consider what you’re looking for from a phone plan. If flexibility and control over price are the most critical factors for you, then prepaid is the way to go. But if having the newest phone and loads of perks suits you better, then postpaid plans are likely to be of more use.

No matter your choice, do ensure that you pick your allowances wisely. This will ensure you won’t run out of data/minutes or suffer from the dreaded bill shock.

Jenna Bunnel
Written by Jenna Bunnel