Are Discount Annual Phone Plans Worth the Risk to Save Money?

If you’re looking for ways to save money on cell phone service, you may have noticed that a lot of prepaid providers are offering discount annual plans.

They’re not for me, but they might be right for you. This article summarizes the thoughts I shared on YouTube.

The Pros and Cons of Annual Prepaid Phone Plans

Annual plans from Visible by Verizon, Mint Mobile, US Mobile and others give you a discount for paying 12 months in advance instead of monthly.

You don’t have a sign a contract, but you won’t get a refund if you cancel before the year is up.

I switched to prepaid phone plans for the flexibility. You lose flexibility with the annual plans. Here are the other factors I considered before deciding against an annual plan.

Annual Plan Pricing

Savings for annual plan vs. monthly plan? Works out to only a few bucks for some plans
Premium prepaid plans seem to have better discounts for yearly plans
If you prepay for a year of service, you have less money in the bank and won’t earn savings interest (5% APY as of April 2024)
You could miss out on future limited-time deals for plans and devices

ACTION ITEM: Do the math! Find out the percentage savings that the annual plan offers, which is usually listed on a service’s website. Then, factor in the online savings account interest that you’ll lose by prepaying.

Free Cell Phone Insurance

I take advantage of free cell phone insurance from my credit card issuers. All of the cards I have that offer this perk require you to pay your phone bill with the credit card monthly — not annually.

I have a separate article that explains how credit card cell phone protection works.

Prepaying Auto Insurance Is Better

I wouldn’t think about prepaying for an annual phone plan unless I already prepaid for auto insurance.

Most auto insurers offer discounts for paying your policy in full. At my last renewal, I saved $155 by paying the full 6-month policy instead of monthly. That would be $310 savings in a year.

So far, I haven’t seen a discount anywhere near $310 for those who prepay for an annual phone plan.

The other factor here is flexibility. With most auto insurers, you can cancel in the middle of the policy and they’ll refund you for the portion you didn’t use.

Once you prepay for a phone plan, that money is gone. No refunds if you cancel early.

Big Life Changes?

I found this fine print on Mint Mobile’s website: “You agree we are not liable for problems relating to Service availability or quality.”

Network performance can vary, even within a city
Moving in the next year? New job? Change in routine?
Search your city name on RootMetrics’ website to compare coverage
Make sure the plan meets your needs now and for the future

Experience With Provider

Don’t sign up for an annual plan without trying out the service first; too risky
Mint Mobile: Get a 3-month introductory plan before committing to a full year
Visible, US Mobile and others: Test out the monthly plan for 1-2 months; free trial not long enough
Evaluate the service’s performance and customer service

Are You in Credit Card Debt or Not?

If you’re in credit card debt, I wouldn’t add to that debt by prepaying for an annual phone plan. Instead, put any extra money toward paying off the debt faster.

There are plenty of affordable monthly plans that can help you reduce your expenses. Visible is $25 a month!

If you pay off your credit card balances in full every month, prepaying for an annual phone plan could work to your advantage by helping you hit the spending requirement for a welcome bonus.

Simplified Approach to Budgeting

Some people like the idea of paying their phone bill only once a year because it simplifies their budget and allows them to focus on saving money in other spending categories.

For a lot of people, those “other” categories are groceries, eating out and entertainment.

If you decide to get an annual phone plan, I recommend setting aside money every month to pay next year’s renewal. You could even create a separate savings account for this goal.

If you’re looking for a free budgeting tool, here’s the step-by-step method that I use. It works!