Let me first say that neither plan is better or worse on its own. The best plan is the one that fits your finances and lifestyle the best. Let’s break each type of plan down so you can determine which is appropriate for you.

Contract or Agreement Plans
Cons

• You are obligated to fulfill either 1- or 2-year wireless agreement. If you cancel before the term ends, you may be charged a hefty cancellation fee.
• If you do not pay your bill for 2 to 3 consecutive months your service will be disconnected.
• Late payments are reported to the major credit reporting agencies

Pros

• Most contract plans offer the latest phone model for free when you enter into a wireless contract for typically a 2 year term.
• Free activation generally comes with new contracts.
• You do not pay a bill until the next billing cycle arrives
• Most plans offer free in-network calling.
• You can add additional lines and wireless broadband service.

Prepaid Plans
Cons

• You have to pay for your phone (and thus may not get as nice of a phone as you’d like).
• You may be charged for activating or reactivating your service.
• You pay for service before you use it.
• Typically you are charged for every call made and received along with data usage and every text message sent.
• If you do not prepay for month of service or refill your minutes you will be disconnected.

Pros

• You are under no obligation to keep service.
• If you don’t pay for a month or refill your account, it will not be reported against your credit.
• You only pay for what you use with most prepaid plans.

YOUR 2 CENTS – What’s your preference?

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