Prepaid vs. Monthly Phone Plans: A Side-by-Side Comparison

Getting everything you need from your mobile network?

Deciding between a prepaid and a monthly mobile plan? You're not alone. Both options come with unique benefits, and the right choice for you all depends on how you use your phone.

So let's break it down. We'll answer all of your questions and explain the key differences in Optimum Mobile’s guide to prepaid and monthly phone plans.

What's the difference between monthly and prepaid phone plans?

The main difference between a monthly and a prepaid phone plan is how you pay for them and how much you pay.

With a monthly plan, you're billed at the end of each cycle for the service you used, often as part of a contract with a carrier. Sometimes, monthly plans can come with perks like device financing or unlimited data.

Prepaid plans, on the other hand, require upfront payment for service. This gives you more control over your budget and eliminates the chance of any surprise fees. Prepaid plans can offer more financial flexibility without any long-term commitments.

Let’s dive into the key differences and help you find the best plan to match your needs.

What is a Monthly Plan?

A monthly plan is, as you'd expect, paid monthly. Importantly, when you sign up for a monthly plan, you're signing a contract. Typically, that means you'll be paying for one year, though some contracts last two years. It is possible to get out of a contract early, but mobile providers will charge a cancellation fee. Monthly plans also often bundle in the price of a new phone: you pay nothing initially, but pay off the phone over the course of the contract.

What are the Pros and Cons of a Monthly Plan?

One of the biggest advantages of postpaid, or monthly cell phone plans, is the ability to finance your cell phone or other devices. This means that instead of paying the full price upfront, you can spread the cost of your phone over a set period, typically 24 or 36 months. This makes it easier to afford the latest smartphones without a large initial expense.

Additionally, monthly plans often come with perks like unlimited data, family plan discounts, and priority customer support, making them a convenient option for those who want a seamless, all-in-one mobile experience.

Here’s a breakdown of the advantages and disadvantages of a monthly cell phone plan:

Pros:

• Often includes perks like discounted or financed phones
• Can come with savings when paying for several lines at once
• Typically offers higher data limits and premium network access
• May include additional features like hotspot data and international calling
• Convenient automatic billing

Cons:

• Requires a contract or ongoing commitment
• A credit check may be required
• Can incur early termination fees if you cancel before the contract ends
• Monthly bills may include extra fees and taxes

Think of a monthly phone contract as a premium option. You pay more, but there are more benefits to compensate. You're often able to get a brand new phone with the contract, amid other perks like free access to streaming services. You typically have the option to upgrade your phone at the end of your contract as well. Provided you sign up again, of course.

Where monthly plans shine is their performance. Their high-speed data caps are higher, so throttling is not much of an issue. The more expensive plans also completely avoid deprioritization. If you need consistent access to fast, reliable data, a monthly plan is by far the best option.

Where they fall short is flexibility. Namely, you can't cancel a monthly plan without paying a fairly high fee, typically in the range of $150 to $200. If you're moving somewhere your current network doesn't cover, your choice is to wait out the contract with poor service or eat the fee. This isn't an especially common problem, but it's not fun when it does happen.

A monthly plan is worth it if you use your phone a lot for things other than making calls. Posting on social media, streaming music and videos, and browsing the Internet all rely on high-speed data. With a monthly plan, that's exactly what you're paying for.

What is a Prepaid Phone?

In terms of the phone itself, prepaid phones are no different than phones on a monthly plan. You can absolutely get an iPhone or Android phone on a prepaid plan. The difference is in how you pay. With a prepaid phone, you pay in advance for a set amount of talk, text, and data, and once it's used up, you need to refill or recharge to continue using the service.

Prepaid plans are also monthly, except you're paying upfront at the beginning of each month. This means there's no penalty for canceling or switching networks. That said, if you're unable to pay a bill, your service will be cut until you pay.

What are the Pros and Cons of a Prepaid Plan?

One major benefit of pay-as-you-go plans is cost control. Since you only pay for what you use, it's easy to avoid surprise overage fees. However, the downside is that per-minute, text, and data rates are often higher than those on monthly contract plans.

It's worth mentioning that when you sign up for a prepaid plan, access to the network is all you're getting. Contract plans often offer perks like new phones or access to streaming services. Those perks are much harder to find on a prepaid plan.

Prepaid plans are also more likely to be throttled or deprioritized compared to the equivalent paid plan. When you sign up for a plan, you're allocated a certain amount of high-speed data. Once you hit that cap, the network slows your speed. This happens on all plans, but prepaid plans typically have a lower data cap compared to contract plans.

Deprioritization is when the network slows down your data speeds whenever the network is busy. This happens when a lot of people are using their phones simultaneously: think the after-work rush in the city, or a large concert or convention. Prepaid plans tend to be low priority, so their speeds are slowed down first.

Here’s an overview of some of the other benefits and drawbacks of prepaid plans:

Pros:

• No contracts or credit checks required
• Get full control over spending with no surprise charges
• Often more flexible—pause service, switch carriers, or change plans anytime
• Usually cheaper for light data users

Cons:

• Typically there are no financing options for new phones
• May have slower data speeds or deprioritization during network congestion
• Fewer perks and add-ons compared to monthly plans
• Requires manual payments to keep the plan active

There is one indisputable fact about prepaid phone plans: they're affordable. Prepaid monthly plans with unlimited data tend to cost around $40 a month, while the equivalent monthly contract plans are typically $20 to $30 more. That's pretty significant. If you're not a heavy phone user, a capped plan will bring the price down even more.

All told, prepaid plans are great for people who want an affordable phone plan, and don't need consistent access to high-speed data. If you're someone who only uses your phone to make calls or text, they might be right for you.

The biggest thing to consider when choosing a phone plan is how you use your phone. Just making calls? Go prepaid. Use a ton of data? Opt for a monthly plan. Somewhere in between? Read through the guide, think about it, and figure out what's best for you.
 

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Prepaid and Monthly Phone Plans Frequently Asked Questions

Are prepaid or monthly phone plans better?

Prepaid and monthly phone plans each have their advantages, depending on your needs. Prepaid plans offer flexibility with no contracts or surprise fees, making them ideal for those who want control over their spending. Monthly plans often come with perks like discounted phones and higher data limits, but require a commitment and regular billing. The best option depends on your budget, data usage, and preference for flexibility or long-term savings.

What phone plans does Optimum offer?

Optimum Mobile offers a range of phone plans to fit different needs. Customers can choose from unlimited data plans or more affordable limited data plans for lighter usage. All plans include nationwide coverage, 5G access where available, and savings when bundled with Optimum Internet.

Can I get a new phone with Optimum?

Upgrading is easy! Optimum Mobile allows customers to upgrade their devices anytime, provided you do not have an outstanding balance on a financed device. To upgrade, users simply select a new device, add it to your cart, and check out through MyMobile. Once the new device arrives, you can transfer your existing SIM card or request a replacement if needed. If financing a new device, customers will see updated charges on their next bill.

How much is the activation fee for Optimum?

Optimum charges a one-time activation fee of $20 per line when you start your service. This fee helps set up your account and get your line up and running smoothly.

Does Optimum Mobile require a contract?

No, Optimum Mobile does not require a contract. Customers can enjoy flexible, no-commitment plans without being locked into a long-term agreement.