Five things to know about prepaid cellphone service.
"I heard that a prepaid plan can be cheaper than signing a cellphone contract. So I got a prepaid plan and put $100 on my account. After the second month, I got a bill for $150. The provider said that I'd used more minutes than were covered by my prepaid balance, and so they charged me for it afterwards. I later learned that this wasn't truly a prepaid plan."
– Li, Courtenay
"Prepaid services" are cellphone services bought in advance of use—for example, a prepaid card or a pay-as-you-go service. You put money (called credit) onto an account. Every time you use the phone, the cost is taken out of your prepaid account balance. When your balance runs out, you buy more credit, "topping up" your account.
Prepaid services are typically less expensive than "postpaid service contracts" (where you are billed all or in part after use). With a prepaid plan, you pay for only what you use. There's no risk of "bill shock"—getting a bill that is much higher than expected.
On the other hand, you have fewer protections with a prepaid plan than you do when you sign a postpaid service contract.
Here are five things you should know when getting prepaid cellphone service.
1. Be clear on whether your plan is truly a prepaid service
Some prepaid plans look and work a lot like postpaid service plans. For example, in some "pay-in-advance" plans, a customer can use up all their prepaid balance and continue to use the service. The provider then includes overage charges on the customer's next bill. This can lead to bill shock, where the bill is much higher than expected. Plans like this are treated as postpaid service plans under the Wireless Code, Canada's main set of rules for cellphone service providers.
The test for whether a cellphone plan is considered a prepaid service or a postpaid service under the Wireless Code is: Can the service provider bill you for some or all charges after use, or can you incur overage charges beyond the prepaid balance?
If the answer is yes, the plan is a postpaid service plan. In which case you have additional protections under the law.
2. The provider must clearly explain the plan
"I got a prepaid phone plan. A week later another provider offered me a good deal on a two-year contract. I signed up, and ported over my prepaid number. I asked for a refund of the unused portion of my prepaid account balance. The provider said no. They said that customers who port to another provider are not entitled to refunds. I complained, as the provider hadn't told me about that condition, as they should have."
– Melissa, Surrey
For prepaid services, the Wireless Code does not require service providers to provide you with a written contract. But the service provider must communicate with you in a way that is clear and accurate. They must use plain language.
The provider must inform you of all conditions and fees that apply to your prepaid balance.
The provider must explain how you can:
- check your usage balance
- contact the provider's customer service department
- complain about the service
If a phone is provided as part of the prepaid service, the provider must also inform you of:
- any early cancellation fees, how much they decrease each month, and when a cancellation fee no longer applies
- the retail price of the phone and the amount you paid for the phone
- where you can find information about device upgrades and the manufacturer’s warranty
If the service provider gives you a written contract for prepaid services, the contract must be clear and easy for you to read and understand.
3. Any phone you get must be unlocked
Any phone provided to you by a service provider must be provided unlocked. (When a phone is locked to a network, it can only work with that provider's voice, text and data services.)
A provider can't charge you to unlock a phone.
4. When the term of your prepaid plan expires, you have a grace period of seven days to "top up" your account
Your prepaid plan will typically have a term, also called the "commitment period". When the term expires, the provider must give you at least seven days to "top up" your account, at no charge, in order to keep the account active.
This grace period applies whether the term is established via a prepaid card or by contributing to a prepaid account balance.
5. You can cancel the plan during the 15-day trial period
If your prepaid plan is subject to an early cancellation fee, you have a 15-day "trial period" to see whether the service meets your needs. During this period, you can cancel the contract—for any reason—without having to pay any penalty or early cancellation fee.
To cancel the contract during the trial period, you can't have used more than half of your monthly usage limits. You must return the device in near-new condition, including the original packaging.
For persons with disabilities, the trial period is 30 days, and the usage limits are doubled.
The trial period starts on the date on which your service begins. If you decide to cancel your contract, contact the provider while you're still in the trial period, and say you want to cancel the contract. It's best to follow-up in writing.
For more on cellphones, see our guidance on negotiating with a cellphone provider.