En Español | Summary:

• Save money by paying for only the calls you make
• Paying for the handset can save on monthly charges
• You can't get an iPhone without a contract

A few years ago, the smart way to get cell phone service was signing a two-year contract. Prepaid plans were available for folks who couldn't pass a credit check, or used their phones very little, but you had to choose a pricey handset from a very limited selection, the cost per minute was high and services beyond straight voice calling were hard to come by. Today the situation has changed drastically, to the point where for many of us, signing a contract is a money-losing proposition.

Your No-Contract Options

With traditional contract cell phone plans, the carrier subsidizes the cost of a phone and charges you more each month to recoup that cost. If you leave early, you pay a penalty since the carrier basically fronted you the money for the equipment. And that penalty can be steep — possibly $300 or more if you leave early in the contract period.

With no-contract service today, you buy the handset, but you can save on monthly bills either by buying only the minutes and service you actually need or by selecting a monthly plan with a lower fee than a contract provider. And if you're unhappy with the service you're experiencing, or want to move to a new handset or new technology (such as the high-speed 4G connections that are now increasingly available nationwide), you're free to do so with no penalty.

Three types of plans are available without signing a contract:

• Prepaid Minutes. After buying a phone, you buy minutes as you need them. If you shop carefully, you'll find the per-minute cost is competitive with a traditional contract plan, and sometimes cheaper. The tricky part is that the minutes you buy expire after a period of time — different packages have different expiration requirements. The bigger the bucket of minutes you buy, the longer your service continues. For example, among Tracfone prepaid offers, you'll find a 60-minute bundle that expires after 90 days for $19.99, and a 400-minute offer for $99 that doesn't expire for a year. Of course, you can always add minutes as needed.
• Prepaid Unlimited. Instead of counting minutes, you pay once for a full month of unlimited service. Boost Mobile, for example, has a $50 monthly plan that includes unlimited talk, texting and Web access. You can add money to your account to cover each month's service as it's due, or provide a credit or debit card number and have the funds transferred automatically.
• Month-to-Month Plans. This works more like conventional cell phone service, with a bill every month, but you can cancel at any time without paying a penalty. Of course, unlike a prepaid plan, you will have to pass a credit check to qualify for service.

Consumer Cellular, a highly rated month-to-month plan provider, offers discounts to AARP members. You choose a plan with a set number of minutes per month, but you can receive notification if you're nearing that number and change plans whenever you like to avoid overage charges. For lifeline service, pay $10 for a no-minute plan and 25 cents per minute for each call.