updated 3/1/2012 1:25:28 PM ET 2012-03-01T18:25:28

The smartphone boom has bloated cellphone bills with pricey data plans — tied to dreaded two-year contracts. But nowadays, you have the option to avoid a contract and get a plan that offers more minutes and more data for about half the price. How can that be?

Why no contract?

Cellphone companies love the reliability of having customers on contract, but they consider consumers with poor credit too risky to sign up. So they created prepaid plans. You buy a cheap phone outright and purchase blocks of calling minutes as you use them.

Where do smartphones come in?

What started as a service for low-income customers has grown into one for everybody. As more people moved to prepaid plans, the services evolved to no-contract —  essentially month-to-month plans, and phones have gone more upscale. BlackBerrys came first, and now a plethora of Android phones.

What will I pay for service?

Plans start as cheap as $25 per month, but that's for as little as 300 call minutes. According to Best Buy, which carries many no-contract providers, most customers opt for plans that provide unlimited calling, texting and (in some cases) data, for $40 to $60 per month. By comparison, an unlimited plan from Sprint costs $100 per month. Lately, however, some no-contract companies have been cutting back. Virgin Wireless, for example, reduces data speeds to a crawl after you've used 2.5 gigabytes in a month, about enough for email, Web basic apps, plus 30 minutes of streaming music and 10 minutes of streaming video per day.

What do the phones cost?

Smartphones range from about $100 to $300 — comparable to what you pay when you sign up for or renew a traditional contract plan. But you own the phone and could even sell it. If you lose or break the phone, you pay the same price again. With a contract plan, you would pay much more for a replacement if you were in the middle of a contract. Expect to pay $200 or more for a good Android phone. Saving a few bucks on a cheaper model isn't worth the frustration of an underpowered phone with a tiny touch screen.

Can I get an iPhone without a contract?

Nope, and possibly never. The iPhone is a very pricey device. Without a carrier subsidy, it starts at $650. That doesn't jibe with bargain ethic.

What companies offer no-contract plans?

Following are the major providers, along with monthly fees for the best plan, the data limits and special features:

  • Boost Mobile - $55 Android/$60 BlackBerry, unlimited data, fees drop the longer you have service
  • Cricket - $55 (with only 1,000 call minutes), unlimited data and music downloads
  • MetroPCS - $40 non-Android feature phones/$60 BlackBerry, unlimited data, high-speed 4G service on some models
  • Straight Talk - $45, unlimited data
  • T-Mobile - $60, 2GB limit, 4G phones
  • Virgin Mobile - $55, 2.5GB limit

© 2012 TechNewsDaily


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