With the economy in the pits, frugality is quickly becoming fashionable. Not only is the thrifty giving up their landlines; they’re opting out of their cell phone plans as well! As a penny-pinching alternative, they are purchasing prepaid phones—an alternative that was once deemed as financially savvy as taking out a payday loan.

When cell phone rates dropped to under $50 a month, pagers became obsolete. And, although cell phone plans may not become obsolete, they are certainly facing stiff challenge from the prepaid market. In recent months, the prepaid market grew three times faster than the contractual plan market. Affordable prepaid rates along with the flexibility they offer are giving wireless services a run for their money. T-Mobile recently gained a huge book of business from the prepaid crowd. For the first time ever, they had more prepaid customers than plan customers.

Prepaid can be cool, too. Prepaid customers are no longer limited to the four scary-big phones in the dusty section of the shelf at the phone store. No, indeed. In fact, the iPhone is one of the most popular prepaid phones available. Most people would agree that the iPhone is very cool.

But the major reason for going prepaid is saving money. While the average AT&T iPhone subscriber is paying over $100 per month for his gadget plan, prepaid customers can get the same full-functionality, all-inclusive capability for a paltry $50 a month. Those savings add up.

A prepaid plan is nothing like the traditional two-year renewable cell phone plan. Prepaid customers choose one of two methods. Method number one is the card plan. Customers purchase prepaid cards that offer an allotted number of minutes. The cards have an expiration date, so customers must use the minutes before the listed date. The second method is the flat-rate method. This is a close cousin to the traditional plan, without the obligation. All you do is pay your monthly fee up front and enjoy your cell phone’s unlimited usage (depending on the ‘plan’) for the duration of the month. Renew as you see fit.

The payday loan stigma of prepaid is gone. And now prepaid may be worth considering. Major carriers in the U.S. are marketing prepaid plans harder than ever.

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