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Smarter Ways to Pay for Cell-Phone Service

The best plan may not necessarily be the least-expensive plan.

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The average person spends just under $100 per month on their smartphone bill. This can be a hefty amount for any single person or couple to contend with, especially if they're trying to save money. Fortunately, there are some less expensive options available, but it's important to first decide if a prepaid or postpaid plan is right for you.

See Also on Kiplinger: Best Cell-Phone Plans for Every Type of User

Prepaid (Off-Contract) Plans

Prepaid contracts mean less commitment, and maybe even less money, but does it make sense for your lifestyle?

Benefits of Prepaid

With a prepaid plan, you won't have to worry about a contract, a credit check, late fees, or activation fees. You simply pay for what you need at the beginning of the month and enjoy a cellphone with less commitment and no binding contracts. The major phone carriers also charge less for their prepaid plans than they do for their traditional plans.

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In the event that you aren't happy with the prepaid phone service that you chose, you can always switch to another plan later with no penalties. You can even test out a phone plan to see if it offers reliable coverage in your area. Then, if you find that you need better coverage in your area, or feel another carrier would offer better coverage when traveling, simply make the switch.

Keep in mind that each cell phone carrier will have its own stipulation on which phones you can use. For instance, some carriers will require you to purchase one of their smartphones, while others will require you to bring your own unlocked phone, and you will just need to pay an additional $10 for a SIM card. Before you sign up for a prepaid plan, make sure that they will accept your phone of choice.

See Also on Kiplinger: Everything You Need to Know About Today's New Cell-Phone Plans

Who It's Right For

If you tend to go over your cell allowance every month, then a prepaid plan can keep you in check, so you don't overspend. If your teen wants a cellphone, then a prepaid plan is the best way to go as it will limit how much they're able to talk and text every month, and you can even set up approved numbers and usage times, so they aren't calling their friends in the middle of the night.

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Cheapest Plan

With so many prepaid options available, you can still stick with the big name providers, and save money in the process.

Verizon has popular prepaid phone plans, starting at only $30 per month. They will even give subscribers an extra 1GB of data per month if you set up automatic payments.

Sprint offers three popular prepaid plans, starting at just $35 per month for 1GB high-speed data and unlimited talk and text.

AT&T offers plans starting at only $30 per month (with an additional $5 per month discount if you set up automatic payments), but you can also choose from plans that allow you to pay $2/day or $0.25/minute.

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T-Mobile offers affordable prepaid plans, including a $30 per month plan, which includes 5GB of data, unlimited text, and 100 minutes of talk time, which is ideal for anyone who doesn't use their phone for talking much. T-Mobile and Cricket also offer good prepaid family plans. If you make calls to other countries, then Ultra Mobile (from T-Mobile) offers a range of plans, which include unlimited texting and calling overseas, and starts at only $19 per month.

If you don't need data, then you can easily find a $25 prepaid plan that includes unlimited talk and text through T-Mobile, Metro PCS, or Cricket Wireless. Straight Talk, Boost Mobile, and Virgin Mobile also offer affordable, straightforward prepaid plans.

The Wirecutter also recommends Consumer Cellular, which offers service similar to AT&T's, at a reduced price. Their most affordable plan is only $10 per month (per line) and allows family members on the same plan to share minutes and enjoy free calls between those phones. If you have the time to compare, there are a lot of other viable options, from less popular cell phone service providers.

Postpaid (Contract) Plans

It might be the more reliable option, but does that make it the best?

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Benefits of Postpaid

Many cell phone users cite the most important benefit of postpaid plans is the reliability. For instance, if you're having trouble with your coverage, it can be more difficult to get a timely solution on a prepaid plan, especially if you don't choose a plan through one of the major carriers. If the data network is congested, contract plans get priority, so you won't experience as many slowdowns in service. Most customers find that they get better customer service with a contract plan as well.

With a postpaid plan, you can go over your limits and simply pay a fee at the end of the month, which is ideal if you aren't sure how much data you'll need. On the other hand, with a prepaid plan where you purchase credit, if you go over your credit, you just won't be able to use your phone.

Who It's Right For

Postpaid plans are great for families. With so many family plans available, you can find the perfect one for every member of your household. Some family plans will allow up to 10 lines on one plan. Prepaid plans tend to top off at about 3GB of data per month, so if you or your family uses a considerable amount of data, then you'll need to look for an appropriate postpaid plan.

If you need a new phone, consider signing up for a postpaid contract, which usually includes a new smartphone at no cost or at a very low cost. Consider the cost of the phone you want (and whether a prepaid plan would even accept it) to see if you'd be saving more money by choosing the postpaid plan and free phone, as opposed to a prepaid plan and the purchase of a new phone.

Cheapest Plan

Virgin Mobile offers the most affordable plan from a major carrier at $35 per month with unlimited talk and texting and 5GB of high-speed data. Republic Wireless offers the best deal for one person at only $15 per month, while T-Mobile and Sprint offer the best deals for families.

The best plan may not necessarily be the cheapest plan. Along with considering the price, you should also consider the network coverage and download speeds. Certain carriers have better coverage in certain areas, so you want to make sure that you go with the carrier who can provide service no matter where you are.

Some employers and schools will also offer discounts for postpaid plans through certain carriers — which can save you a lot. You can also get a discount from some carriers for setting up automatic payments.

If you live in a large city, most carriers will offer dependable coverage there, so you won't have to pay for one of the more expensive plans that offer coverage everywhere. If you live in a more remote area, you may need to pay a higher fee for more coverage.

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Which Plan Is Right for You?

Contract plans can have a range of additional fees, like activation fees, monthly access fees, and more. You will want to consider that when comparing whether prepaid or postpaid is right for you. It's important to also take into account how many people will be on your account and how much data you'll need.

This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website.

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This article is from Wise Bread, not the Kiplinger editorial staff.