September 21, 2018

The Pros and Cons of Having a Mobile Contract versus Prepaid Mobile

There are benefits to both prepaid and postpaid mobile plans, to choose the right one you need to think about your needs.

Use first, pay later system

Mobile phone plans in Australia have always been about convenience. They came with a new phone, and you never had to worry about running out of credit.

Mobile phone plans in Australia have always been about convenience. They came with a new phone, and you never had to worry about running out of credit, as it is a ‘use first, pay later system’.

However, prepaid recharge options have changed a lot in recent years, and the fear of having no credit is no longer necessary. Also, with the entry of low-cost providers, prepaid mobile plans are a reasonable option for those looking to get the best value mobile plan. Here’s a breakdown of the pros and cons of both prepaid mobile plans and mobile phone contracts:

Prepaid Mobile Phones

With a prepaid plan, you buy credit and then use it up over time. Unlike, mobile contracts, prepaid plans do come with a phone for free, you must buy it outright or use one you already have.

The biggest advantage of prepaid is that you only pay for what you use.  If you’re going overseas for a holiday, simply don’t buy any credit that month. You’re not locked into any monthly commitment, in fact, you can recharge as often or as little as you like. Moreover, if you don’t like your current provider or find a better deal elsewhere, it’s incredibly easier to swap.

Most providers offer a couple of prepaid packages targeted at different users. You may have the option to choose these kinds of packages:

  • Long expiry.
  • Loads of SMS and data.
  • Unlimited calls.
  • Cheap international calls.

These days’ prepaid services can also be recharged quickly, either automatically from a credit card or through an app.

The downside to prepaid is that you need a phone to go with it. Also, heavy users will end up paying more for unlimited use on prepaid, than you would with a locked-in contract.

Mobile Phone Contracts

Mobile phone contracts in Australia are good for those who want convenience. If you are willing to pay for the more expensive plan, you should be able to get a great phone and unlimited everything.

The biggest downside is that you are locked-in to a contract, usually for two years. If you want to cancel the contract, you will still end up paying roughly the same amount as if you simply let the contract run out. So, if you lose or break your phone, you still have to pay for the contract. You can get insurance to cover your phone, but it costs extra.

In reality, mobile phone plans are overkill for most users, or they encourage you to use more than you actually need. If you truly do need a lot of call credit, and internet data, and want a top of the line phone every two years, then plans can be a good option.

When comparing options, work out the entire cost over the full contract period or two years. For instance, if you buy a $400 phone, and recharge $25 on a prepaid plan each month it will cost you $1000 over two years, or $40 a month for two years.

So, a mobile phone plan with the same phone and similar call/data value would need to be less than $40 a month to be good value.

Another way to look at it is if you are willing to spending $80 a month on a mobile plan for two years it would cost you $1920. That means you could buy a $1000 phone and would have $35 a month to spend on prepaid credit.

If you’re comparing mobile phone plans and are looking for the best value, make sure you work out the total cost. While a mobile phone plan offers convenience, it will most likely be more expensive over time. Prepaid offers more flexibility and control over costs.

About the author  ⁄ Marxa Dillan

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