How Do Prepaid Cell Phones Work?
Basics of Prepaid Phones
Prepaid cell phones are offered by many different phone companies, and come in a variety of styles and brands. The purpose of buying a prepaid phone is to pay for minutes and usage as you go, as opposed to in advance, which is required for normal (or post-paid) phone plans. Prepaid cell phones don't require a credit check or deposit, which are required to obtain a traditional phone plan. They are much easier to get; no information or restrictions regarding age, identity or address apply to prepaid phones.
Another purpose of prepaid phones is to carefully manage minute usage---this is especially true for teenagers and those who tend to go over the minute allotment attached to traditional phone plans. On the other hand, those who tend not to use many minutes, such as senior citizens, find prepaid phones more beneficial since they don't have to pay for minutes they won't use.
Business is another
use for prepaid phones. Small business owners and independent contractors and consultants often buy a prepaid phone so that they can have a separate line just for business purposes.
Buying Minutes and Phones
Prepaid phones work in one of several ways: a card is bought with a unique identification or pin code that has a set amount of minutes stored on it; service is bought through a company that offers a set amount of minutes per month; or charges for the amount of minutes used is deducted from the users bank or credit card account daily, with the user setting a limit on how much in charges they are able to accrue.
Contrary to popular belief, not every phone will work with prepaid service. Typically, it's necessary to purchase a dedicated prepaid handset. Prepaid phones usually cannot be switched to post-paid (traditional) phone plans. Likewise, phones used for post-paid service plans typically can't be used for prepaid service.Source: ehow.com