Difference Between Pay As You Go & Prepaid

By Nicholas Johnson

As technology has advanced, mobile phone use has increased. Many mobile carriers provide both contract and prepaid options for customers. Prepaid phone services have gained popularity because of their static cost and lack of a contract.

Prepaid Phones & Plans

Prepaid mobile phones do not require a contract and the consumer pays for minutes or time in advance. If a user fails to pay, they do not incur fees or service deductions and the phone becomes disconnected from service until another purchase is made.

The term "prepaid" can also refer to non-contract service plans that include a monthly charge and additional services such as unlimited minutes or data.

Pay As You Go Plans

"Pay as you go" refers to prepaid cell phone plans with consumable minutes instead of a non-contract service plan. A user purchases minutes in card or digital form, and refills them as necessary depending on usage. Pay-as-you-go phone types differ in number of minutes per card and the length of time the phone will remain active between minute purchases.

Advantages & Disadvantages

Because prepaid cell phones do not require a contract, there is no possibility of late payments or late fees. Minutes are used at the customer's discretion and the phone will stop working when the minutes are gone or activation time has expired.

As-needed minutes in prepaid systems provide a low-cost alternative for users who do not use their phones frequently or wish to cap their phones' usage. However, prepaid plans can be costly when used excessively, because of higher per-minute costs. Some prepaid plans also require at least one minute purchase per month for continued service, and some place expiration dates on remaining minutes.