Verizon logo 2013

Back in November I wrote an article about ditching your contract and going unlocked, and it’s a common sentiment you’ll here across the web: ridding yourself of a contract means more freedom and in most situations it costs less in the long-run. Of course, I’d be lying if I said there were no trade-offs with going with a prepaid or no-contract post-paid carrier.

As with nearly everything in life, both contract and no-contract options have their own set of pros and cons. With that in mind, let’s jump in and explore the positives and negatives of both sides of the fence.

Keep in mind that this piece was written with North American carriers (particularly the U.S.) in mind. While some of these points may apply to other regions across the globe, others will not.

Contract plans

Although I no longer personally have a contracted commitment to a carrier, I have certainly played this game before with multiple different carriers: Sprint, Verizon, AT&T and US Cellular. While I’m ultimately happy with my decision to leave these guys behind, there are some positives to signing that contract.

Pros:

Better customer service. While this isn’t necessarily true for all prepaid carriers and won’t hold true for postpaid no-contract plans, in many cases customer service for contract plans tends to be better. After all, you’ve agreed to commit two years to their services and it’s only natural that they would do their best (in theory) to keep you happy so you renew your contract when your time with them is up.

Network priority. If the data network is highly congested, who do you think is going to get priority? Bingo, the guy signed up to the contract. That said, this has never been a problem for me personally, though I’ve heard complaints from those in more congested markets about potential slow-down when on prepay versus contract.

You pay less for your phones. Even if T-Mobile and the other big carriers offer financing for their no-contract plans, we can’t ignore the fact that you’re paying $500+ for a phone that might only be $50 – $200 on-contract. While the carrier gets its money back by subsidizing the costs through higher plan rates, some folks are willing to put up with this if it means they don’t have to pay so much up front.

Family plans can be worth it. Some of this depends on what prepaid, postpaid no-contract or contract plan you choice — but in some cases large family plans on contract can be cheaper than going prepaid. Still, both T-Mobile and Cricket (now owned by AT&T) offer really good family rates that easily beats out the contract plans.

Better coverage. While this point doesn’t necessarily apply to no-contract postpaid plans, prepaid plans often have limited coverage when compared to contract plans. For example, my wife experimented with Verizon prepaid for a while and found that there were many areas she was roaming that we knew for a fact “on-contract” Verizon customers would have been covered without having to pay any kind of roaming fee. Again, it really depends on your prepaid/no-contract carrier, but in many cases, contract plans still hold the edge here.

Device insurance. While there are certainly 3rd party phone insurance options and some prepaid carriers like Cricket even offer their own insurance plans, the truth is that signing up for insurance on a postpaid contract carrier is usually a much easier process. Whether insurance is worth the deductible and monthly fees is a matter of opinion, however.

Cons:

More expensive. Contract plans might give you cheaper phones up front, but the actual month to month costs are much higher. In an earlier article we found that a Verizon contract plan with 2GB data had an estimated ownership cost of $2,995. In contrast, Straight Talk had an ownership cost of $1407. Obviously these prices will vary considerably depending on how expensive of a phone you get but there’s no denying that you pay more in the long haul.

Less freedom. You are committed for two whole years and the only way out is a hefty termination fee. Even going overseas with your phone is a huge hassle or, at the very least, a costly affair.

Less phone choices. While this was once the opposite situation, most GSM-based prepaid services allow you to bring any phone over that works with T-Mobile/AT&T frequencies, including imported devices. With a carrier contract, however, you’re stuck with only the phones that your specific cell phone provider offers.

Fees. Activation fees, monthly access fees, monthly rate fees – contract plans tend to be riddled with fees. On the prepaid and no-contract postpaid side, you generally have fewer fees and sometimes there’s just taxes. In Cricket’s case, you don’t even have taxes as it is all included in the advertised price.

cricket-service

No-contract and prepaid plans

There can be some very real differences between the service provided by a postpaid no-contract carrier like T-Mobile and a more traditional prepaid option like those from Cricket, Aio Wireless or T-Mobile Prepaid. That said the goals are pretty much the same regardless of which of these options you choose: you want to save money and you want more freedom to do what you like with your device.

Pros:

Big savings. This is, without a doubt, the biggest advantage. Regardless of whether you’re going with a postpaid no-contract plan or a prepaid offering, odds are you will save a very noticeable amount each month as opposed to what you’d be paying as a on-contract customer. As an additional bonus, there are usually less fees on the prepaid and postpaid no-contract side of the fence, and the terms are usually a bit more transparent.

No credit checks. For those that either have no credit, poor credit or simply don’t want to involve their credit score just to get a phone — prepaid is a way around this barrier. Keep in mind that postpaid no-contract plans could still require credit checks and deposits, though.

Flexibility. Need to take a break from paying for phone service? No problem. Have to go overseas? That’s cool, and if you have a GSM-based unlocked phone, you can even take your headset with you and put in a SIM card from the country you are visiting.

You own your phone. It’s unlocked and you can do with it what you please. Not satisfied with T-Mobile? Switch over to StraightTalk. If StraightTalk doesn’t fit the bill, you have other options including Cricket, AT&T Go Phone and the list goes on.

More phone choices. Particularly if you are on a GSM-based network, you can bring just about any device over as long as it supports your network’s frequencies. This means you have considerably more phone choices than most carriers. This was once the opposite situation, but the ability to bring your own phone to most prepaid networks has changed everything.

Cons:

Phones cost full price. While there’s a growing number of handsets that don’t cost that much (Moto E, Moto X, Nexus 5, OnePlus One), the reality is you’ll still need to pay anywhere from $130 – $400 for a decent phone and sometimes more than this. That’s a hard cost to swallow all at once for some. Thankfully postpaid no-contract plans from carriers like T-Mobile offer an alternative: you can pay for your full-priced phone via monthly installments. For those that end up paying outright, just take comfort in knowing that you’re saving thousands in the long run.

Not the top priority for a carrier. Whether it’s the coverage zone or network priority, contract plans generally do better here. Again, it really depends on what prepaid or no-contract postpaid carrier you go with.

Second-rate customer service. Often times prepaid customer service isn’t as good as the big dogs, especially if you are with an MVNO. If you stick to a bigger prepaid carrier or a postpaid no-contract service, this won’t be a problem.

Thinking about ditching that contract? Take a look at the top unlocked cheap smartphones.

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The compromise

As you can see, there are many potential advantages and disadvantages to be found on both sides of the fence. Of course some of these advantages and disadvantages won’t hold true in your own experience, as it often depends on the carrier and plan you end up with.

For those that are allured by the idea of saving money and having more flexibility but also looking for a more conventional contract experience, the best compromise here might be to consider a postpaid no-contract plan. With postpaid no-contract, you’ll be able to finance your phone (if you choose) and will have the same coverage and customer service opportunities as a contract carrier.

As for pricing? The costs will still be higher than most prepaid alternatives, but you’ll get noticeable discounts from most carriers if you decide to go off-contract. For those going with a no-contract postpaid plan, T-Mobile still remains the very best choice, providing you live in an area with solid coverage.

What do you think, do you prefer prepaid, contract or postpaid no-contract? What do you feel are the strongest advantages of your preferred service? Any other pros or cons you can think of for either contract or no-contract options? Let us know in the comments below!

Andrew Grush
Andrew is one of the three Managing Editors of Android Authority, primarily responsible for the overseeing of US team of writers, in addition to several other projects such as VR Source and more. He loves tech, gaming, his family, and good conversations with like-minded folks.
  • joe

    Idk about all this. I have a family plan with verizon and pay about 70$ after taxes. I looked into T-Mobile and to get unlimited data, 4 of us need to pay at least 80$ a piece. More if you include super high end phones and the jump program. I might swtich to Att after the contract is up.

  • Xavier_NYC

    Being on a contract pro: discounted phones cons: stuck in a contract for 2 years. Not on contract pros: not tied to a carrier and can leave whenever cons: Paying full retail for phones

    • My name is….

      Full retail but you save a lot each month and you have no ties.

      its a far better option and i still wonder why 2-year plans are so popular in USA

      • As I understand it, most US providers don’t discount the monthly plan for people with their own phones … so they end up paying the same amount per month anyway. In that case, subsidization makes financial sense. I haven’t researched it lately, but I think that T-Mobile is the only carrier that provides such a discount.

      • Oz

        I still don’t get it, either. And I don’t know why we stand for it.

  • Tony G.

    My Verizon contract expired so I’m paying month to month. I paid full price for my Droid Maxx ($399) in December. I use 4 to 10 GB of data per month and paying $74/month for grandfathered unlimited. I will be screwed when they take away our unlimited.

    • Lyle G.

      Sprint has 4g lte with unlimited everything (inc. 4g) for $80 a month.

    • wezi427

      I’m in the same boat. The last phone that I had on contract was an iPhone 4, I currently have a Note 2 that I paid full price for in January of 2013. I’m going to stay with them until they kick me off.

  • hoggleboggle

    I have to say I a glad the competition between networks here in the UK combined with much tighter regulation both UK wide as well as from the EU has kept prices so reasonable. Here you essentially have 3 options: prepaid cards and phones which are usually locked to a single carrier, contracts (normally 2 years now) which include a subsidised phone that is locked to the network or the same contracts but cheaper without a phone that can be used with any unlocked phone.

  • Justin S.

    I’m off contact with VZW after years of renewing but I’m leaving. Tired of CDMA/Verizon – no Nexus, no OnePlus, no unlocked and no discount for bringing my own phone (new or used). And the LTE isn’t what it used to be. I’m going to BYOD and get an AT&T sim card with no contact. I’m hoping that gives me device freedom and solid service.

    • gmx

      VZW give you a $10 a month discount for Out of Contract or BYOD for 8GB or Less More Everything Plans and $25 for 10GB or More per line. So 4 lines OOC on 10GB is $160/Mo

  • Aravind Arsenal

    Can somebody explain how the system works in India?I mostly see only prepaid user’s here and I haven’t seen a contract except some iPhone thing from Airtel

  • Mark Washington

    I pay 2400 a year for 4 phones on Sprint a year

  • MasterMuffin

    No contract all the way!

    • Jayfeather787

      Amen!

  • acashe42

    I’ve been contract free on Verizon for 6 years with a perfect plan.

    • lots3say

      How much are you paying and what is your plan?

  • RxGadget

    I am on VZW. Total Bill $190/month. 4GB Plan= $70 + HTC DNA (off contract) $40 phone fee + Samsung GS3 (contract ends 12/14) $40 phone fee + MiFi 4G (contract till 5/2015 $20 device fee (used for laptop and tablet wifi when no free wifi). total with taxes about $190. Way too much. Checked out At&T SAME pricing. VZW has better coverage EVERYWHERE I go especially in my house since 4G coverage now. No 3G coverage previously needed to purchase a signal booster from VZW but no longer needed.

    • Heimrik

      I was paying that for a few years…. I finally got sick of it and went to Tmobile. I pay almost $100 less every month and don’t have to worry about carrier locked phones. I have decent coverage everywhere I go. Nearly just as good as Verizon. And no contract. The minute I’m dissatisfied, I can go somewhere else. Verizon is a massive ripoff.

      • Sam

        Ya,and guess what other cellular companies rip you off? A T and T,Cricket,and Sprint. Everyone I know who is on Sprint has nothing but complaints with them. Listen,cheaper is NOT always better. I was with T Mobile several years ago,constantly had dropped calls,and the same with Cingular before they merged with A T and T,and their customer service was horrible,as was the reception on their phones. Why do you think Sprint is rated near the bottom next to Cricket? Their network is not as good as they want you to believe. I work for a local county here in Utah and I am on Verizon,I have the HTC One M7. NO dropped calls,very good reception,and bars,ya,bars,nearly everywhere that I go. Can Sprint,Cricket,A T and T,Net 10,Virgin,Consumer Cellular,or Metro PC claim that? No. Again,avoid Sprint,avoid Cricket,and avoid Consumer Cellular. For 6 gigs a month on Verizon,minus not getting unlimited data,I can pay for 6 gigs a month and only pay around 80.00 each month,and I would only have to pay around 10.00 more if I wanted to use 10 gigs per month.

  • Lan

    The phone isn’t any cheaper with contracts. The costs are just shifted into your monthly data bill and ETF. You still pay that amount.

  • Deepthi

    A lot of people are switching to no-contract deals, but most people don’t really end up switching because they are already stuck in a contract with some company. And this switch by cell phone companies were basically only in the past year or so, whereas a lot of cell phone customers have contracts extending to 2016. So customers, although they would want to switch, aren’t able to because they don’t want to shell out a bunch of money in Early Termination Fees. Companies like Cellbreaker are the only ones that can really help customers save money and move towards this new no-contract future that cell phone companies seem so eager to move towards.

  • prepaidwirelessguy

    I don’t have time to comment on the entire article, however, the customer service point doesn’t seem to make sense. If you don’t have a contract, wouldn’t carriers be more motivated to provide great service, for a customer could choose to leave ANY day, not after two years. No contract infers that in the long run carriers would need to provide better products and better service as they don’t have a contact tying anyone in; just the investment a customer has made buying a phone. That said, of course, prepaid is notorious for having worse customer service, however, it’s more about cost structure than the logic made here about keeping contract customers happy in the long run.

    • Sorsha Moon

      Implies not infers.

  • You pay a lot more on contract, full source of details: http://goo.gl/B2bQkq

    I have just cancelled my contract,

  • Wade Steele

    I am sick of being taken advantage of by greedy carriers. Prepaid is ultimately the way to go.

  • Will

    With our current Verizon contract, my wife and I share data and have unlimited calls. Our monthly cost is set for the length of the contract. If we switch to a no-contract plan, can Verizon change our monthly cost? Or is the monthly cost locked in for as long as we remain customers?

    • prepaidwirelessguy

      It really depends how they decide to treat it. Carriers often grandfather in old plans, so as long as you keep paying on time you still get to use the same plan. Or even if you miss a payment, if your account is activated with that plan you get to keep it so long as you don’t make any changes. They could also decide to eliminate it and migrate all users to a different/newer plan. Generally speaking, carriers tend to grandfather customers in until it gets too expensive to support. If it can just cruise along and not be impacted by new plans or system changes, they’ll leave it. That said, there’s no guarantee, so if you’re super happy with your contract plan, you should just keep it.

  • NJrick

    I have a six months left on my Verizon contract. I decided to buy a new phone to play around with prepaid services and then decide if I would stick with Verizon. The phone cost $50 more than if I took the early upgrade. After much research, I decided on Red Pocket for one month. The same (?) coverage I got wound up with dropped calls in several places. I’m now going to try Armed Forces Mobile since they claim their service uses the Verizon RETAIL towers rather than the PREPAID towers that Red Pocket uses. Stay tuned.

  • druekberg

    Mostly well-written, but the grammar mistake in the first sentence is a turn-off, as well as in this phrase: “there’s just taxes.” Maybe most of your readers won’t care, but for those who know English, it’s a turn-off. Not to mention the lack of detail in your assessments. Just saying.