Last week, I spoke with personal-finance writer Greg Karp about how young adults can save money. We brainstormed ideas for one of his upcoming newspaper columns. “I’m willing to bet that many young people can save money by cutting back on their cell phone,” I said. “It’s kind of shocking how these have become a Need instead of a Want.”
“Yeah,” Karp said. “And what about prepaid phones?”
“I don’t know anything about them,” I said.
“They’re great,” Karp said. “My wife and I are saving hundreds of dollars a year by switching to prepaid phones. I’ll send you a link to an article I wrote.”
It turns out that Karp is something of a prepaid phone evangelist. But no wonder! In this piece from last December, he describes the benefits of switching two cell phones in his household to prepaid:
The net result is savings of about $800 per year, compared with a family plan through a major contract wireless carrier. I haven’t missed my former plan at all. And I’ve cut my monthly cell phone cost to less than $10. My reception and call quality are actually better.
Karp documented his plunge into prepaid phones with two posts to his blog. In the first, he explains why he decided to make the change. In the second, he actually describes the process of switching to prepaid. (This last post was very helpful to me. My big hang-up on making these sorts of changes is figuring out how to actually do them.)
I’m in the middle of an iPhone contract with AT&T but I generally don’t come anywhere close to using all of my 450 monthly minutes. (I had accumulated thousands of rollover minutes until I blew those all away with a phone-intensive business project in March.) I’m willing to consider moving to pre-paid once my current contract is over. When I do, I’ll check out the following providers:
- Tracfone, which offers some phones with “double minutes for life”
- NET10 is another prepaid cell phone provider
- T-Mobile prepaid plans
- Virgin Mobile calls their prepaid plans “pay-as-you-go” (as do many other providers)
Consumer Reports had an article in its January 2009 issue about how to buy a prepaid phone. For more information on the switch to prepaid cell phone service, check out the following:
- 20-Something Finance: A review of Net10′s prepaid wireless service
- ConsumerAffairs.com: Prepaid wireless plans can save time and money (this is a great article on the subject)
- Consumer Reports electronics blog: Prepaid cell phone service: A growing way to save money
- Consumer Reports money blog: Prepaid cell phones can offer savings
That last article contains some shocking numbers. In the U.S., only 16% of adults use prepaid phones, but:
Elsewhere around the world, prepaid is the norm. Prepaid market share is 35 percent in France, 66 percent in the United Kingdom, 76 percent in Hong Kong, and 90 percent in Italy, according to a recent Federal Communications Commission report.
Basically, major consumer advocacy organizations are proponents of prepaid cell phones, and they’re beginning to catch on among the financially savvy. But so long as it’s more profitable to pitch traditional cell plans, you’re not likely to see a mass movement to prepaid in the United States.
Addendum: Consensus among the commenters seems to be that prepaid cell phones make sense for those who are low-volume users. If you’re a heavy cell phone user, you’re probably still better off with a contract. Your best bet is to spend the time to run the numbers.
This article is about Choices, Hints and Tips, Money Hacks
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I forgot to say that the service we use is T-Mobile. Like others have said — it keeps you from being tethered to the dog gone thing! We still have our landline to allow for internet connections. I wasn’t born with a phone up to my head, and I want to keep it that way!
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I used prepaid when I studied abroad in France, and it worked great. Texts were cheaper than placing calls, and as other people mentioned all incoming calls/texts were not charged to you. Seems like it would be more expensive in the US, for the same usage.
I wouldn’t consider it now, though, because between my family and long distance boyfriend I would end up paying far more than what I pay now, especially since everyone is in-network.
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Thank you so much for this post. Our contract is up in a couple of months and we definitely are switching to prepaid. We moved to Ohio from overseas and had prepaid in Europe: it’s a huge money saver for us. Unfortunately, when we moved back Stateside we didn’t realize they were available before we signed a contract.
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A cautionary tale in favor of prepaid phones: a friend once had his cell phone (with a contract) stolen in the college cafeteria. In the two hour period until he noticed the theft and blocked the SIM card, the thieves had racked up a $700 bill with call to Africa. After negotiating the phone company reduced the charges to $350. If it had been a prepaid phone, he would had only lost the minutes he had on it at the time.
Another tip for T-Mobile prepaid customers: dial #999# to see the remaining minutes on your display.
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Yes, as others have said, pre-paid is great if you’re not using your phone a lot. At least here in Europe you pay a bit more per minute than with contract phones, making it more expensive if you use it a lot. But then knowing you have only x amount of money on the card lets you think about which calls you make…
Since I only pay 4 € per month for my subscription phone with half the price (4 cents per minute) compared to a prepaid it was a logical choice to use a contract for my moderate use.
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I must say I’m a bit surprised at how much it apparently costs in the US. People here are mentioning 15-20$ a month.
My current plan costs me roughly 20€ for three months (that’s about 8,6 US$/month). By changing plans I also got a brand new phone for 18$ that would otherwise have cost just about 200.
The plans offered here in Finland are apparently pretty okay price-wise.
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*Addition to previous post*
That 20$ is including all text messages and calls as well. I’m only paying about 0,90$ in service charge per month.
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Furthermore, when I had a contract I used to make a lot of stupid calls and texts just for the sake of it, because I knew I could. I seemed silly to let all those texts go to waste, so I used to forward bad jokes to my friends all the time!
Having a PAYG plan might make you reevaluate how you use your mobile and whether or not your friend needs to know right now that you’re thinking of buying new shoes… The psychological impact of knowing you’re paying for each text you send is pretty big. Now I use my mobile a lot less. Between £5 and £10 a month worth of calls and texts combined.
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I’ve been a user of Virgin Mobile prepaid for years. The coverage isn’t the greatest in the world, but because I don’t use a huge number of minutes it works well for me.
The plan I’ve had with them for about 2 years now is their Month2Month plan. I pay about $35.00 for 300 anytime/1000 night&weekend minutes per month. They range all the way up to an unlimited plan. If you go over, the charge is $.20/minute.
Best thing is you’re not tied to any contract. Just pay your monthly fee and use the minutes. No roll-over minutes, though. And no data plan either. Unlimited texting is an additional $10.99/mo I believe.
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My husband has a cell plan paid for by his company, as he does a lot of international calls that our family doesn’t need to pay for.
For me, I’ve had the same basic Nokia phone for the last 8 years, and it still suits my needs. I’ve been prepaid for the past 5 years. $100 per year for service in case of emergency or the odd call from one of the very few who have my number and school emergency. Last year, it was time for my daughter to get one, I started checking into family plans, and was absolutely floored at the $80 or $90 per month fees. That’s over $1000 per year! So, I told my daughter that we would do the same for her and get her $100 for the year, and if she goes over the minutes allotted, she’ll be responsible for them herself. Likewise, texting costs $5 per month, and I told her she could get it, but she would have to pay for it herself. Well, I guess she didn’t see it as that important.
I’m sorry…but I’m trying to save for college for my girls…that extra $1000 per year(which would come to $8000+interest over 8 years) will go much further in her education than being able to text someone at any point day or night about…what? Whether she should get a pair of shoes or not?
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I’d like to point out that pre-paid isn’t the only option. Some companies buy wholesale minutes from the major carriers and resell them to customers without long-term contracts. This way, you can still do post paid without a contract so you can change your plan as often as you need to. I work with Consumer Cellular and they also offer discounts to AAA and AARP members.
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In the list of prepaid plans you provided you forgot AT&T. I switched from their contract plan to a pre-paid ‘Go Phone’ and they let me keep my AT&T number. Their customer service was great.
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I haven’t gone to a pre-paid cell phone yet (though I’ve looked at it), but I still might in the future. I’m in the telecom industry and so I get a discount rate on my cell service.
However, I wanted to address a few people above who questioned why to even keep a landline. IMHO, a landline is essential for safety, a cellphone is not. People don’t realize how vulnerable cell service is to disruption. A catastrophic natural disaster could easily interfere with signal transmission, and military systems can target taking out wireless transmission systems.
Landlines aren’t invulnerable either, but they are more secure. They can also be virtually free when bundled with broadband services, which I think will kill off cable over the next decade.
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what i’d like to see is a way to keep my current phone number (a cell number I’ve had for YEARS now), while being able to try these other, cheaper, options. It’s not worth the pain of my grandmother not being able to get a hold of me, to save me three dollars a month.
Like, i’d love to combine Google Voice (which has free out-dialing, and free in calls now) with a prepaid phone (which my friend did, where she gets to assignee one number that it’s free to get calls from… that’d be her Google Voice #), but only if i could transfer my cell number over to it (once my contract is done, of course).
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My wife and I have one prepaid phone and one contract phone, both with T-Mobile. Calls between those two phones don’t cost any minutes, since they’re both T-Mobile phones. We couldn’t quite meet our needs with two prepaid phones (a shame as that really would have saved us a bundle), but at least this way we save something. The second phone ends up costing less than $10 a month. That really beats paying $30 a month for a phone that only gets used 1-2 days a week.
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I use Virgin Mobile (20 cents per minute plan) and last year put $100 in my account , which keeps it active for the year. I have two months left in the year and still am on track to only use $100 in the entire year. I plan on doing the same thing in July when my time runs out. I’ll get any minutes/money left over in my account, plus the $100 I put in , and it will stay active for a year.
I use the phone very little, and always check my messages from a landline to avoid being charged 20 cents per minute, but when I need or want it it’s there and doesn’t cost me a mint.
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I dumped my land line last year and now have only a cell phone. But I went a step further and got a Tracfone and pay upfront for use. It’s much more cost-effective and the service is fine.
The only reason I’d kept my landline was to send faxes but I do that on the Internet now, so who needs a landline?
Plus I have no contract anymore for my phone and the quality is great.
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I want to preface this by saying that it’s going to sound like an ad, and I apologize, and I do NOT work for T-Mobile. I’m just a very happy customer.
I switched from a plan to pre-paid, I think, about 4 years ago. It was really easy. I called them and said I wanted to switch. They said “no problem,” and I was even able to keep my number. Their customer service has been great for me.
I switched, because I got mad every time I looked at my bill at all of the added taxes and fees. It almost doubles the bill! I said “no more” and took control of my finances back.
I will probably stay with pre-paid, even when I start using my number for my business. I don’t anticipate my business being phone-heavy, though I intend to be available to my customers.
I would say definitely make the switch and take back control of your money. If you have the cell phone for business, the nice thing is you can write it off if you have to stay on a plan. (Depending, of course, on how much volume is business-related. I don’t advocate cheating.)
Edited to add: I, too, have dropped my landline and now have only a cell phone. It makes it much easier for people to reach me. Big savings!
Jen M.
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I recommend T-Mobile Flex Pay. I switched from Verizon Wireless to T-Mobile close to two months ago. As a result, I save approximately $50 a month. I have all the benefits of a post-paid account (600 anytime mins., unlimited n + w, unlimited data, 400 text messages, insurance) w/o a contractual obligation.
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I have been using prepaid phone for couple of years now and have saved a bundle. It is cheaper and it allows you to better monitor your calls as well. I will encourage you to try it out because you will not regret it.
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I have been using Net10 for several years now, and have had only one problem that made me consider moving away from them. The problem was I was trying to have a cell number rolled back to an older phone, and they just kept messing around and around. That’s the only real problem I’ve had.
I usually but 150 minutes a month, and when my minutes get too low, I add a large amount of minutes (600 or 1000) to build a balance from.
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I also have a net10 prepaid phone, I moved across from contract about a year ago and I haven’t looked back. I was able to keep my number without any problems and I’m saving around $35 per month in comparison to what I was spending on contract. I only pay 10 cents per minute for local and long distance calls. I don’t have to pay for roaming and there is no daily fee or extra state taxes so it really is the cheapest prepaid around.
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Prepaid is fantastic. If you only need phone service you can get a prepaid plan for $1/day, so even if you used your phone every day 24/7 it would still be no more than $31 for a month with 31 days
If you use your phone too much to feel that prepaid is a good option, or you want text and mobile web, with Cricket Wireless you can pay a flat monthly fee for unlimited service. For text and talking only it’s $35, but add in unlimited web browsing and it’s $60/month. With no overages, ever (because it’s unlimited). Much nicer than worrying about surprise bill at the end of the month.
Cutting cell phone bills should be at the top of everyone’s mind, because it is one of the easiest ways to reduce overall expenses.
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A great way to save money on cell phone charges is to switch to prepaid cell phone service. You pay only for the minutes you use and that’s it! You can text, make long distance calls, etc. without spending more than necessary. I would recommend switching to prepaid to anyone who is tight on money and need a break.
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I dumped my AT&T phone and got out of my cellphone contract when the company changed its terms. (Did you know that if they do that, it voids the contract? They don’t tell you that, but I saw it on the Consumerist site and it worked! No termination fee too. Haha.)
Anyway, I got a prepaid Net10 phone and everything is 10 cents a minute… even International calls which is great since my son is traveling right now.
But the best thing about this is that there aren’t any bills and I know what my costs are because I pay upfront for my calls. It’s great!
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I have a Tracfone and have been using it alot this summer. It’s a great way to keep in touch with your kids. Calls and texts are less expensive on a TracFone than on other phones and with no contract, there’s no surprises!
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If anyone is still reading these comments this far down, here’s another benefit of pre-paid plans.
The phones are cheap.
When I had a regular cell phone, with contract, I had my phone break. The cell phone company was of no help. To get the phone repaired would cost $100, and they’d give me a loner (but they had no loners available), I could replace the phone with a “cheap” refurbished phone for $100, which they didn’t have in stock. So, i’d have to wait a few weeks in either case.
I offered to re-up my contract for another two years for a brand new phone. Nope. I was one year into a two year contract and it would be another 4 months before they’d allow me to do that.
Now maybe I should’ve paid for the ‘insurance’ for such an event, but having done the math, I would’ve ended up paying even more than the $100 and still have ended up with a refurbished phone.
I did the math and determined, that given how much I used the phone. I could switch to Tracfone, and it would be cheaper, even with the early termination fee for breaking my contract early.
Tracfones are low cost, over the counter puchases, You may not have all the bells & whistles but if all you want for features is to just make phone calls, they work as well as the expensive phones do.
I’ve since lost a tracfone (twice) and although one loses the minutes that are on the lost phone, replacing the phone itself is not a major expense.
The carriers abuse their customer base by deliberately keeping cheaper phones off their shelves, thereby making it easier to get users into contracts so that the expensive phones can be then ‘subsidized’.
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I recently switched from a monthly cell phone bill of $95 to prepaid and I found that on average a $70 prepayment will last me 2.5 months. That’s a savings of 70%. It was one of the best decisions I’ve made.
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I have Straight Talk, which is just an amazing deal.
I was skeptical at first but everything good I’d heard about it is true.
No more crappy coverage from AT+T. The Verizon network is solid and I haven’t dropped a call yet.
I think $45 a month is fantastic and I got a very nice Samsung phone with a qwerty keyboard so texting and web surfing is easy too.
I’m saving hundreds of dollars a year now so it’s pretty awesome.
I’m not the only one who thinks so, either.
Here’s another happy Straight Talk-er:
http://www.youtube.com/watch?v=oI40Fqglgys
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a virgin phone for mobile emergencies and a majickjack for $20 a year unlimited usa and canada is my complete answer to all my needs
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I’m surprised that only one comment has mentioned Boost. I’m looking to switch from a $80/year Tracfone setup because I’m paying mainly for service time, not minutes.
Boost’s flexibility should let me drop to under $20/year with my current usage, and the lower per-minute cost means I could talk five times as much and still have a lower yearly bill.
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We like Kajeet. $30 unlimited talk and text… can’t beat that price. There’s a little trick to getting that plan. You have to call and request the family plan. Also, Kajeet works for us because of the parental features. We can control our kid’s phones from home or any computer. We used a promo code to get the phone and it save for us as well. “BARGAIN” was the code.
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I have Straight Talk on the Verizon network. Bought it at Walmart and it’s an amazing deal. The Samsung Finesse is a very cool smartphone and paying only $45 a month for unlimited everything is the best deal going!
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I have Straight Talk as well and I am very satified with it. A friend of mine recommended that I give Walmart a try when I was looking for a new cell phone company and I had no idea that Walmart was carrying their own prepaid service – what a bargain! I’m paying $45 a month for unlimited service on the Verizon network and I have the best of all cell worlds – great service at a great price. The selection of phones is great as well and very well priced. Straight Talk is a great deal without the pages of bills and contracts I hated.
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I use MetroPCS (a post-payment) for my service. Their services are limited to a select few metropolitan areas but significantly cheaper than the telecom giants like verizon and at&t. I get unlimited minutes and data for $45/mo, but if I ever have to go out of town I keep a pre-pay AT&T phone with me just in case I don’t get service on the Metro. I think the situation works well for me, and is worth checking into if you moderately travel. It beats paying roaming at $.40c per minute and possible lack of phone service. Metro’s coverage is growing quite a bit now, so I think I can phase out the prepay.
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For Mother’s Day I am getting my Mom a net10 phone. She doesn’t use her phone too much and has been just totally taken advantage of with huge bills and she will never ever use the amount of minutes allotted to her. Getting her a prepaid Net10 is the best thing for her.. shes going to save soooo much money!!. It’s simple for her because theres nothing hidden to trick her with random fees and no contracts.
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I got my frugal husband a Net10 phone for father’s day. It’s perfect for him since he’s not much of a talker and didn’t want to spend a lot of money on carrying around a cell phone. I finally convinced him that it’s totally affordable at $15 a month and it’s sooo much more convenient to have one. Now, he swears by it
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You know Beth I completely agree with what you are saying. I am really thinking about getting a Net10 phone because my mom really needs something just like that. To save money and spend 15 bucks a month.. is just perfect. I heard the service is great too. Is that true???
I mean ten cents a minute is UNREAL for someone who isnt on a crazy contract and forced to spend so much more money.
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Links to Greg Karp articles appear broken.
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Net10 is a great company if you want to switch over to prepaid. I’ve had it for a year and the service is great and affordable.
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I have been with contracts all my life. And recently discovered how much money i could be saving by becoming a prepaid customer! So i did and its remarkable how much money i save every month with NET10, their coverage is great from coast to coast, but their customer service aint all that great, but every company has its flaws!
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I have been using a prepaid phone for years. Currently I have one from U.S. Celluar. I pay only $40 a month for 450 min unlimited text, video, and pic messaging and a small amount of web data. If I wanted unlimited talk and text, video, and pic all I would have to do is pay an extra $10 a month. They also have some smartphone plans.
This is way cheaper than my friends who have contact plans with U.S. Cellular.
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I had prepaid T-Mobile and recently switched to Verizon because my friend sold me his razr DROID phone for really cheap. Supposedly it was a 600$ phone for $100 so i went for it. And what a mistake. I didn’t need to sign a contract “thank god ” because I brought my own fone in.
Now I paid 100 dollars a month for unlimited talk and text in additional 80 dollars a month for data taxes insurance. So i am over paying 130$ a month. When I asked if they had a prepaid plan they said yes its called verizon unleashed. This service cost 50 dollars a month for unlimited text talk and data the only difference is it’s prepaid. So when I tried signing up for this they said I can’t because my phone is 4g and you get punished for buying a 4g phone apparently if it were only 3g it would all be $130 a month cheaper? ?? The sad thing is only 3g works in my area anyways… the moral of the story is. Never get Verizon and if you do. Only get prepaid. Actually T-Mobile doesn’t have $50 a month unless it’s prepaid so looks like prepaid is cheaper now with every company. So looks like contracts are only for people who want free phones but if you think about it. I’m paying 180$ a month now and instead of unlimited data I now get 10gigs. Prepaid was advertising unlimited.
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I have only used pre-paids. I started with Virgin Mobile and would not recommend it to anyone. Their customer service is lousy. I was satisfied at first but then bought a new phone. It didn’t have the features advertised which is why I bought it. I changed back to my other phone, returned the new phone and they shut off my number and refused to restore it. The number that was on all my business cards now got a message that the phone was no longer in service.
I switched to AT&T Go phone. I don’t make that much use of my cell phone, so I use the $1 per day on the days I use it. We still have a land line which is required for our internet service. As others have pointed out, that is a lousy plan if you use the phone every day as your primary line. They also charge for each text message.
I think the whole smart phone thing may be a game changer in terms of prepaid. Does anyone know if any companies have pre-paid plans for an Android?
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BTW, to be fair to Virgin Mobile, the reason they wouldn’t give me my number back once they had mistakenly shut it off is that they couldn’t. They get their service through Sprint and once they return the number, they can’t get it back again.
But that is the problem. Virgin Mobile markets cell service, mostly directed at teens. It doesn’t actually provide the service. If you are going to go with pre-paid choose a company that actually provides the service you are buying.
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It just seems surreal to me that if I go into the store and get a phone there with a contract I will be paying so much more money. Whay aren’t more people going the prepaid route? Is it becasue the choice of phones is limited? At&t, Tmobile, and verizon all have this deal for only $50 a month you get unlimited talk, text, and data. It is unreal.
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