The war between mobile phone contracts and prepaid plans will never end, because both set-ups have their own advantages and disadvantages. Both can either be very good or very bad for you, depending on your situation, spending behaviour and other factors. However, current studies suggest that mobile phone contracts may be a good thing for people who are undergoing financial hardships. Here are some reasons why:
Mobile phone contracts are now being recommended for people who have bad credit ratings and financial problems. Most of the time, the two are interlinked because people with bad credit ratings are usually experiencing financial hardships and vice versa. If you're trying to pay off your debts, you don't have a lot of wiggling room for other expenses, so chances are you don't have the money to pay for a new handset.
Common sense might tell you, so why would you feel like buying a mobile phone when you're in debt? Well, just because you're in debt doesn't mean you don't need it. Mobile phones are extremely useful if you're looking for a job, trying to find buyers for stuff you need to sell, and other income generating activities. So really, a person with financial troubles might very well need a mobile phone to find sources of income.
Mobile phone contracts are the best because you can get your handset without having to pay for anything upfront. The total cost of the handset will be broken down and then added to your monthly plan. This means you can pay for your phone slowly but surely. Watch out though, as some providers of bad credit mobile phones do require upfront payment. Although the amount may not be much, it's worth finding a provider that guarantees no cash upfront if you don't have the funds.
Many people frown on mobile phone contracts because they are very limiting. However, some of these are the same people who fail to meet their monthly payments because they tend to go over their limits and therefore, they need to pay for the additional calls and texts. Sure, prepaid plans are great when it comes to giving you freedom over your phone usage, but if you are not the type to practice a lot of self-control, this may lead to overspending.
Overspending is something that people with bad credit can't afford, no pun intended. If you're running out of funds for necessities like rent, food and utilities, it's a must to curb your mobile phone spending. With prepaid card top-ups, the increments are often so small that you shrug them off. However, the freedom to top-up credits as much as you want can work against you because this means you'll be spending money in small increments frequently, so you may not notice until the spending pile up on you and you realize too late that you spent too much for that month on your call and text credits.
As limiting as it may be, monthly limits actually help you develop discipline and self-control, texting and calling only when it is vital. This mindset may very well crossover to other aspects of your life, helping you manage your limited funds effectively.