What is a Prepaid Phone Plan?

picking a phone plan

Prepaid phone plans are taking over

Australian telcos have increased the number of prepaid mobile plans over the last decade. Formerly perceived as not so glamorous, many more Australians are now subscribing to prepaid services than ever before.

Popularity of prepaid plans continue to increase in Australia.

Around 45 percent of Australian mobile connections are on prepaid plans. Source: Whatphone

With a prepaid phone plan, a subscriber must pay in advance before gaining access to the network and plan inclusions. Essentially, the services in question are the same as postpaid and/or contract plans, such as voice, text, and data.

Prepaid plans are offered by all major Australian telcos (Optus, Telstra and Vodafone) as well as numerous MVNOs.

What features are unique to prepaid plans?

Many features set aside prepaid plans from other plans. These features are usually what attract customers to purchase them. Here’s a look at some of those unique features:

  • Payment before service — The most distinguishing feature of all prepaid plans is the fact all service charges must be paid for before any can be rendered. Although this may seem less attractive than paying after receiving, it certainly helps subscribers avoid billshock.
  • No contract — Prepaid plans are not contracted plans. Subscribers on these plans are at liberty to tweak plans to their personal needs or preferences before recharging.
  • No credit check — Unlike most phone plans, prepaid plans do not require a credit check before subscription.
  • Widely available — Prepaid plans are widely available. They are offered by all major telcos as well as numerous MVNOs.
  • Short term plans — Most prepaid plans are short term; ranging from 28 to 31 days maximum. This allows users to maintain flexibility.
  • Affordability — Generally, prepaid plans are perceived as more affordable than any other form of phone plans.
  • No overage charges — There are no overage charges with prepaid plans. Once the subscriber runs out of the allocated minutes, texts, or data, the service simply shuts off. This enables subscribers save money as overage charges are often very steep.

Are there any alternatives to prepaid plans?

There are alternatives to prepaid plans, such as SIM Only and contract plans. With SIM Only plans, the provider grants the subscriber a SIM card to access their network services. These SIM only plans are generally postpaid plans, where the subscriber pays for services after using them. The service is billed per billing cycle and, should the subscriber exceed their allocated minutes, messages or data, steep overage charges will be applied.

Contract plans are also postpaid plans, but tie the subscriber to long-term usage–usually over 12 months.

Are there any benefits to subscribing to prepaid plans?

  • Flexibility — Perhaps the biggest advantage of a prepaid plan is flexibility. Unlike most contract plans, those on prepaid plans are not required to sign hefty contracts which incur fees upon early termination. With plans like these, subscribers are free to roam a selection of plans as offered by their network providers until they find what suits them best.
  • Predictability — With prepaid phone plans, subscribers can predict their monthly expenditure on text messages, voice calls, and data. Unlike postpaid SIM Only plans, which could incur overage charges, prepaid plans allow the subscriber predict the amount of money they are willing to spend on phone services with each recharge.
  • Accurate usage — Prepaid phone plans give subscribers an accurate picture of the amount of data they consume per billing cycle. Since services are turned off the minute allocated phone services are exhausted, subscribers are given an even clearer picture of how much data they really use per billing cycle.

Final words: Why are prepaid plans so popular these days?

Over the last decade, prepaid phone plans have become increasingly popular in Australia. Amongst many factors, this rise can be attributed to the many benefits associated with them. From subscriber flexibility to affordability and numerous other factors, prepaid plans cater not just to recurrent residents, but to individuals such as expatriates, international students, and tourists, who are in need of a quick subscription. In summary, prepaid phone plans are generally more inclusive and cater to a wider range of subscribers in comparison to other phone plans.

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.