Which no-contract cellphone plan costs less?

Last year at Living on the Cheap, we covered a wide range of prepaid cellphone options if you were looking to save money on your cellphone bill. Prepaid plans are an alternative to the contract-based plans that the big cellphone companies are offering and they can save you some real money over those recurring monthly charges. Making a two-year commitment to one of the big companies can also be more than a little stifling.

Now there are a couple of in-between options: Both T-Mobile and AT&T are offering no-contract plans for your cellular pleasure.

Prepaid vs. no contract?

So what’s the difference? Really, it comes down to when the bill is due. On prepay, you pay the cell company up front. No credit check, no hassles.

A no-contract plan is paid at the end of the month. Not a big difference — except the company does take the opportunity to add taxes and fees onto your bill. (You’re still paying those taxes with prepaid plans — they’re just rolled into the flat fees.) This will typically add another $8 to $12 to your monthly bill.

So how do the specific charges break down? Let’s take a look.

Big Blue

AT&T is one of the two biggies in the cell business. Frankly, I was surprised to see it go the no-contract route. The company is advertising its Mobile Share plan with a huge media blitz.

$45 a month is the pitch. But what do you get for that?

Unlimited talk time and texting are included. So far, so good. The base line data that is included with this plan is 300 MB. That is just enough data to get you hooked and deeply in trouble — about 50 song downloads or as few as two YouTube videos. Don’t even think about Netflix unless you are on WiFi. Additional data will be billed at $10 per gigabyte.

It is easy to picture your nice $45 plan coming in at $100 if you are not careful.

Taking the the Mobile Share data up to a little more reasonable 2 gig a month bumps your plan to $80 a month. AT&T will still bill you for every bit of data over that amount.

What about a smart phone to add to that plan? AT&T will let you finance a phone and pay for it monthly, but you are not going to get the contract discount for that phone. A brand new iPhone 5S would run you $650. Ouch. Spreading that out over 20 payments adds $32.50 a month to your bill.

Be prepared: If you buy a phone, the entire sales tax will be due at purchase. That will addanother $30 to $50, depending on your state’s taxes.

While you could get that same iPhone for $199 with a two-year contract, you are paying an extra $15 a month for that discount. That is $360 over the life of the contract for that $450 discount. You actually get a slightly better deal on AT&T to have a contract if you choose to upgrade your phone every other year.

If you walk away on your no-contract deal, the entire amount you owe on your phone is due immediately. If you stick with AT&T, the company will let you trade that phone in for a new one every 12 or 18 months, depending on how long you have financed it over.

The Pink Network

T-Mobile’s no-contract plan is set up a bit differently. Their base plan is $50 a month (again, plus $10 or so in taxes) for 500 MB a month of data and unlimited talk and text. There is also a one-time $10 fee for a SIM card that goes in your phone.

The real benefit with T-Mobile: If you go over your 500 MB limit, the company doesn’t charge you extra fees. It just slows your Internet speed down. This is a big deal because you won’t get any surprises in your bill from T-Mobile at the end of the month. If you want unlimited high speed, you can jump to its $70 a month plan

T-Mobile will also finance your fancy new phone. The company will give you a small discount on an iPhone5S and sell it to you for $600 on 24 payments of $25. Again, if you walk away from T-Mobile, the balance on your phone is due immediately. T-Mobile does have a plan called JUMP that allows you to trade in your phone every six months, but it adds $10 a month to your bill. A bonus: JUMP  also functions as an insurance plan for damage or loss on that phone.

T-Mobile has an additional benefit if you are planning on some international travel. It has free text and data roaming in more than 100 countries at no additional charge. This means your U.S. phone number is still your number while you travel abroad. You will be limited to the slower 3G Web speeds while you are there unless you pay extra.

Phone calls are charged at 20 cents a minute, but a little bit of creativity with Skype will get you around that since the data is free.

My recommendation

Here’s the deal: T-Mobile is a far better deal on the no-contract end of things than AT&T. Both plans are basically the same price and taxes and fees will add another $10 a month so they are really in the $55 to $60 range each month. However, one undisciplined data month with AT&T and you could be looking at a bill twice that.

I actually took the plunge myself and went with T-Mobile. I opted not to go the financing route but bought an unlocked Google Nexus 5 at $349 to pair with its service. Nearly any unlocked GSM phone that labels itself as “quad band” will work perfectly wherever you go.

T-Mobile also allows you to suspend your phone for up to three months if you want to shelve the phone between trips. This lowers your bill to $10 a month and allows you to keep the same phone number.

Are you looking for the best deal on a family plan? Check out our comparison of cell phone family plan deals. You can also check out Republic Wireless, which has plans starting at $5 a month.