How Does a Prepaid Cell Phone Work?

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Prepaid cell phones are cell phones that do not require a contract but do require the user to purchase services in advance. Cellular providers offer prepaid services, including talk minutes, text messages and data usage, for purchase individually or in bundles.

Service is based on the number of units needed, such as minutes of talk, number of text messages or megabytes of data, and customers can purchase more units as necessary. Many providers also offer unlimited prepaid cell phone packages that are priced based on periods of time instead of usage amounts. Most of the unlimited usage packages are sold in one- to three-month increments. Prepaid cell phones plans are usually provided only to purchasers who own their phones outright.

The amount topped up, if unused in a month, rolls over to the next month. The prepaid phone charges the user prior to the providing the service. Thus, the user knows exactly the amount being paid for service. Deactivation of the prepaid cell phone occurs as soon as the minutes run out.