05.15.25
When shopping for a phone plan, you have a bunch of details and choices to sort through. It helps to know how a cell phone plan works before you make any decisions, so you can select a phone plan that fits your needs.
How a cell phone plan works
A phone plan lets you use a carrier’s network to call, text and connect to the internet when you’re away from Wi-Fi. When you sign up for a plan, you’ll get a physical SIM card or a code to activate an eSIM. That SIM then identifies your phone and the plan you’re on to carriers so they’ll grant access to the services you pay for.
The two basic types of phone plans are postpaid and prepaid. Each has implications for your budget, credit, and the services and perks to expect.
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How do postpaid phone plans work?
A postpaid phone plan is a contract you enter for a specific length of time, often 24 or 36 months. You agree to pay, and the carrier agrees to provide access and services. Here’s how it works:
You select a plan that fits your needs, considering talk/text and data use, network coverage, speeds, and price.
The carrier you choose typically will check your credit to see how likely you are to pay as agreed. It may also offer discounts and financing for a new phone, with payments over time, or even a free phone for signing up.
You activate the SIM for the new service.
The carrier bills you at the end of the month for your plan cost plus any extras you used (such extra data or data roaming when traveling abroad).
When the contract is over, you decide whether to continue or switch carriers. You might also have opportunities to exit early. Other carriers might try to win your business by covering the cost of breaking your contract, for example.
Pros of postpain plans
Cons of postpaid plans
- Typically offer higher data limits than prepaid plans.
- Usually offer perks like multi-line discounts, free or discounted streaming subscriptions, bundling offers like cheaper home internet.
- Less likely to have deprioritized access during network congestion.
- Generally more expensive than prepaid plans, and you may get surprise charges if you exceed your plan’s allowances.
- Harder to switch carriers when you’re on a contract. A phone bought through the carrier is likely to be locked to it till paid off.
- The credit check and monthly phone bill can affect your credit.
How do prepaid phone plans work?
With prepaid plans, you don’t have a contract because you’re paying up front. That means there’s no credit check, either, because you’re not entering into a contract that requires paying over time. Here’s how it works:
You select a prepaid service and sign up, then pay for the service period you chose. Many plans are month-to-month but offer a discount if you prepay for a longer period; other plans require a three-month or longer commitment.
You activate the SIM for the new service.
You use the service period you paid for, then decide after the paid service ends whether to continue or switch carriers.
Pros of prepaid plans
Cons of prepaid plans
- Tend to be cheaper than postpaid; no surprise charges.
- No credit check, and no danger of credit damage if you fail to pay.
- No contract means it’s easy to switch carriers if you don’t like the value or service.
- May have lower data limits, no roaming, etc. and require buying add-ons if you need more service.
- More likely to be deprioritized during network congestion.
- Less likely to offer perks and discounts.
- You may not get a refund for prepaid services you no longer want.
How do family phone plans work?
Family plans or group plans are essentially multi-line discounts. A carrier may give you a lower per-line price when you sign up for several lines, or it might offer something like “fourth line free.” Family plans are more common with postpaid carriers, but you’ll find some from prepaid as well.
When signing up, be sure to consider these factors:
How many lines you need and your budget: Not every plan will work — some are limited to a single line or just a few — and not every plan allowing multiple lines will offer a discount.
The fine print of the offer: You may lose the discounted price if you drop one of the lines, for example.
What each line gets: Does each line have its own data, or do they all share the same data limit? A common bucket of data to use can help you avoid extra charges if you have some light data users balancing out a data hog. Some carriers even let you pick a different plan for each line on a shared account so you can accommodate what each user needs.
After signing up, these plans function the same way as others: Postpaid plans are billed at the end of the cycle, and you may be on the hook for surprise charges if someone uses extra services. Prepaid plans bill up front, so you’re safe from extra charges unless you choose to buy extras like a data top-up.
How do international phone plans work?
If what you want to do is call or text international numbers from home, simply choose a plan that includes talk/text to the destinations you want. Check the plan details to discover how much it costs to call or text another country, and which ones are covered. For example, T-Mobile's Experience More and Experience Beyond plans offer unlimited texts to any country but you have to buy its Stateside International add-on for calls to a defined list of countries.
However, if you want flexibility to use your phone while you’re in other countries, you have a few choices:
When shopping for a plan, add international use to your checklist
Quite a few phone plans offer talk, text and sometimes data use in Canada and Mexico. If your travel typically keeps you in the U.S. and its close neighbors, one of these plans will cover your needs without extra cost. A few plans have an even broader footprint; for example, AT&T’s Unlimited Premium PL offers roaming in Canda, Mexico and 20 Latin American countries.
Be sure to read the fine print so you know about any limits on minutes of talk, number of texts, and amount and speed of data provided. Also, be aware that some plans require that the majority or a certain percentage of your overall use be within the U.S. Most plans are not intended for extended use in another country.
Pay for an add-on to your existing plan for use while traveling
If you travel more broadly, look into an international service add-on to your plan for the duration of your trip. Some carriers have a per-day or per-week charge, others charge per GB of data, etc. Depending on the cost, you might want to explore the next option as a more economical choice.
Get an international SIM card to use while traveling
If your phone is not locked to a specific carrier, an easy and economical option is to buy an international SIM card covering your destination. The increasing prevalence of dual-SIM and eSIM phones has made this a convenient approach. You simply choose the best international SIM for your situation, then activate the SIM when you arrive so you can use cellular networks in the country or region you’re visiting without paying extra to your existing provider.
Keep in mind, most of these don’t include a local phone number. For calls, you’d need to use a virtual number like you’re provided with TextNow.
