Which is better value: plan or prepaid?

Every telco in Australia offers a range of phone plans to suit the needs of different customers, but all these options can lead to confusion. The obnoxious and cheesy adverts on television aren’t helping and neither is all the jargon being thrown at you. We’ve broken down what two of the biggest buzz phrases are in the mobile phone world: ‘prepaid’ and ‘postpaid’ mobile, what they mean and how they compare.

Mobile phone plans come in two varieties – prepaid and postpaid services, and each has its own unique features. The big question is: Which option is better value for money? We’ve done some research and compiled an overview of prepaid and postpaid phone plans to help you make up your mind.

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What are prepaid phone plans?

A prepaid mobile phone plan is one with which you pay the provider a certain amount of money up front, which is then converted into mobile credit for you to use as you please, on either calls, texts or mobile data, or a combination of them – services which are charged at rates advertised by the carrier.

The Good

Most telcos will display your prepaid credit balance on your online account, or send it to you on request via text message, so that you can keep track of how much you’re spending, and how much balance you have remaining. When you’ve used up your credit, you can simply buy more, usually called a ‘recharge’. Speaking of which, a huge bonus of prepaid phone plans is that, if you won’t be using your phone for a while – say, while on your overseas trip of a lifetime – there’s no obligation to recharge and spend more money for credit you won’t be using. Prepaid is simply a case of pay for what you use.

The big advantage of prepaid plans over postpaid is that they involve no lock-in contracts. There’s no fixed amount for customers to pay – you simply pay for what you want to use, and when. For many mobile users, this means spending significantly less money compared to life on a postpaid plan – you don’t pay for what you don’t use, and you don’t pay higher fees if you go over a credit limit.

The Bad

However, the other side of this is that if you quickly burn through your credit, you will need to recharge again, or go a period of time unable to make calls, send messages, or check Facebook! Our survey of prepaid Aussie customers found that about one in five often go long periods with no phone credit.

Prepaid credit expires after a certain period of time, typically 28 or 30 days, but this can vary between plans. Some cheap prepaid plans can be as short as seven days, whereas other long-expiry plans can last for an entire year (365 days).

Furthermore, prepaid services have no contracts, meaning you can leave the service whenever you want by simply not buying any more credit. This simplicity does have a downside, however, which is that most prepaid services are SIM card-only and don’t come with an actual phone, so you need to bring your own.

You’ll need to buy a handset yourself, which can be a substantial upfront cost, though it does mean you get to choose the model of phone that suits your needs. Paying directly for what you use also means a lack of any extra included credit, a major drawcard of the second type of mobile service – postpaid.

Prepaid summary

  • Buy credit upfront which you can spend on calls, texts and mobile data
  • Only pay for what you actually use
  • Leave your service provider whenever you want
  • SIM-only – bring your own phone handset

Prepaid Mobile Satisfaction Ratings

What are postpaid plans?

Postpaid phone plans are the more common option offered by the major mobile carriers, as they involve a fixed monthly payment which you pay at the end of the month, in exchange for a set amount of calls, texts and data to use during that billing period. Postpaid contracts are typically over one of three lengths – an auto-renewing month-to-month basis, 12 months or 24 months.

The Good

The big selling point of postpaid plans is that they tend to offer better value than prepaid plans, and offer much more credit than what you actually pay for in the normal sense. As an example, a plan with a $30 monthly payment might include $500 worth of credit for calls, texts and data. The more expensive the plan, the better value it is likely to offer, which contrasts with prepaid plans that usually charge the same rates even if you buy a large amount of credit. So if you want $500 worth of calls, texts and data, you’ll need to pay $500.

Higher-priced postpaid plans often include unlimited calls and texts, as well as large quantities of data, which makes them ideal for heavy mobile users and businesses. Furthermore, the crowded market and intense competition amongst service providers has led to ‘unlimited’ plans costing as little as $40 per month.

The Bad

Postpaid plans are also appealing due to the monthly bill being fixed and usually payable automatically as a direct debit from your bank account – truly a case of ‘set and forget’. It means there’s no risk of running out of credit just when you need it most, as you’ll always know exactly how much you’ve got and what you’re spending. On the other hand, it’s much easier to overspend on a postpaid service, as carriers usually charge significantly higher rates if you exceed your monthly limits. This is unlike on a prepaid service, where if you run out of credit you simply can’t spend anything until you top up.

What you need to know about phone bundles

Another big selling point of postpaid contracts is that they often include a mobile handset, the cost of which is included in the price. Many providers subsidise the cost of the phone as an incentive for you to sign up to a longer contract (i.e. you can pay less for a top-notch phone on a plan than you would if you bought it outright).

However, plans that include a handset are usually only available on 24 month contracts, so you will not be able to easily, or cheaply, change plans if you’re not happy. You will need to pay the amount owning for the phone in question, which as a one-off payment could be a huge amount. But if you’re not after a handset, you can always just get a SIM-only plan, which are available on monthly terms.

Postpaid summary

  • Receive a fixed amount of calls, texts and data for a set price every month
  • Short or long-term contracts are available – monthly to 12 and 24 months
  • Monthly no contract plans are becoming increasingly competitive
  • Usually much better value than prepaid services
  • Can include your choice of a large range of phone handsets at an extra cost

Postpaid Mobile Satisfaction Ratings

Which one should you choose?

The mobile service you should choose depends entirely on how you use your phone. If you’re a light user who doesn’t make many calls or texts in a month, if you’re looking for a cheap, no-frills mobile handset, or if you don’t want to spend too much money on mobile services, then prepaid could be your best option.

If you’re often on your phone and use a lot of credit and data, if you’re looking for a plan that’s great value for money, or if you want that fancy new phone on an easy monthly payment, then the right option for you could be a postpaid service. The best thing to do before deciding on a new service is to keep track of how much you use your phone (and how much you spend) for a month or two so as to get an idea of what your needs really are.

The advantages and disadvantages of the two types of phone plans can be summed up as follows:

  Prepaid plans Postpaid plans
  • Only pay for what you use
  • No lock-in contract – change provider whenever you want
  • More controlled and flexible spending
  • Typically lower rates than postpaid
  • Superior value to prepaid – large credit and data inclusions
  • Fixed monthly payments
  • Never run out of credit
  • Get the latest phone handsets
  • Inferior value proposition
  • Run out of credit and you can’t make calls
  • Need to buy your own mobile phone outright
  • Can be locked into a contract over 12 or 24 months
  • Expensive rates if you exceed your credit or data limit

How do prepaid and postpaid plans compare?

After learning about what the key differences are between prepaid and postpaid mobile plan, it can’t hurt to have a look at what’s on offer among the two – after all, your curiosity is probably itching by now.

Prepaid Mobile Offers

Prepaid plans are still popular! They give the user freedom and flexibility, and are especially useful if your needs may differ from one month to the next. Further, you don’t have to give your credit card details to phone providers – you can simply recharge when you see fit. Overall, in the $30-$40 range, Woolworths Mobile, Optus, OVO Mobile and TPG all offer similar prices with a data range between 3GB and 8 GB. The data disparity is quite large, so it pays to look around!

Postpaid Mobile Offers

Month-to-month postpaid contracts are increasingly offering the best value in mobile phone plan land. In the $30-$40 range, you can expect to get unlimited calls and texts, at least 3GB of data, and maybe some international call minutes too. Some key players here are Telechoice, Think Mobile, C Mobile and Vaya, all offering similar plans and prices.

So, what have we learned here? Well, the good news is that it’s never been a better time to be a mobile phone user. Whether you decide to go prepaid or postpaid, you have countless offers to choose from. In fact, you should never be afraid to compare your options and switch providers if you think you could get a better deal elsewhere.

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