Pay as you go cellular phone

Prepaid cards give students and small businesses a handle on costs

Cellular phones may free you from the tangle of wires, but they tend to tie you up in paperwork--credit checks, annual contracts, and monthly bills. Now you can sign up for prepaid cellular plans that let you pay upfront for airtime, eradicating the paperwork while providing good, affordable service. And the plans are so simple, you can buy them at gas stations.

The idea behind prepaid cellular was to attract callers whose credit problems would prevent them from subscribing to a wireless carrier. But they also appeal to others, such as students or small-business people, who want the convenience of cellular service but need to budget their airtime. "This is for the people who want cellular phones but have heard horror stories about the bills," says Robert Dandrea of Topp Telecom of Miami, which started selling its TracFone ($100, not including an airtime card) in 7-Elevens in April.

TracFone has sold more than 150,000 phones in the past two years. It shares what is currently a tiny portion of the cellular market (about 2 percent of the 54 million American cell phone users) with regional prepaid services offered by companies such as BellSouth, Omnipoint, and PageTel. But the share is growing quickly; securities analysts at Donaldson, Lufkin & Jenrette in New York say one quarter of all new cellular service this year will be prepaid.

Dial tone. The appeal of prepaid cellular is its simplicity. The phones are sturdy and come programmed for prepaid calling. TracFone has been using the Uniden PCD 2000, which offers good sound quality and reception plus features such as speed dial. Topp also plans to start selling prepaid versions of Motorola's popular StarTAC and MicroTAC phones this November.

Airtime is sold in blocks, such as $30 for 30 units or $100 for 200 units (a unit equals a minute of airtime for nonroaming calls to local numbers.) Once you've got a card and a phone, a toll-free call will activate them; all you have to do is punch in codes that an operator gives you in exchange for the number from the card. The company assigns you a local telephone number and credits you with airtime. You don't even have to give your name.

Once you've used the original airtime, you buy another card and call to add the minutes to your phone. You must add a new card every 60 days to keep the phone activated. But with some services, such as Topp Telecom's TracFone, even if the phone is deactivated, unused airtime never expires--it is simply stored until the phone is activated again.

Rates for airtime typically are more expensive for prepaid cellular plans than for contracted services, but prepaid users generally don't pay monthly fees. If you need a cell phone to conduct lengthy business calls during your morning commute, contract service would be more economical. But if you need to let someone know you're running late or find out the address of the restaurant where you're meeting friends, prepaid is an economical option.