What is a Prepaid SIM Card?

The Subscriber Identity Module (SIM) card is a small computer board that is at the heart of every cell phone. Among other functions, the SIM card contains information such as the phone number, the carrier being used, and the rates to be paid by the user for services. Other information is also stored on the SIM card, such as the user's phone directory and list of recent calls. Though the SIM card itself is simply the device that used to identify the subscriber on a network, SIM cards are often marketed as postpaid or prepaid. A prepaid SIM card usually comes along with a specified amount of credit with the calling company which can be topped up as needed.

A postpaid SIM card permits the user to talk for as long as they like. The calls are logged and the user is billed monthly for the talk time and other services used, such as outgoing text messages and the purchase of ring tones. It's usually a requirement for postpaid cell phone SIM cards that a credit card be on file with the carrier, as they are providing a service in advance of payment that can easily amount to hundreds of dollars if the user isn't careful.

A prepaid SIM card is purchased for a set amount that acts as a credit balance with the provider. As talk time and other services are used, the company makes charges against the credit amount. If the credit drops to zero, service is immediately discontinued. The card must be reloaded with additional credit in order for service to continue or to be restored.

Generally speaking, a prepaid SIM card has a time limit on how long the credit is available for use. When this time expires, the balance is lost unless the user has already reloaded their account. Reloading in advance of expiration usually allows the balance from the previous period to carry over in addition to the new credit amount. Some SIM card providers allow users unlimited talk time free of charge between certain hours and on weekends, just like standard postpaid cell phone accounts.

Other than the fact that a prepaid SIM card is paid for in advance of services provided, it works the same as a postpaid card. Unlike prepaid calling cards, no special dialing codes are required. Callers dialing a prepaid cell phone will not notice a difference.

These cards can be a smart, economical option for those on a budget, for those with children in the family, and for people with credit problems. Since talk time is only available for as long as the credit balance holds out, it's impossible to go over budget. Neither a credit card nor good credit is required to purchase most prepaid SIMs. Along with starter phones, prepaid SIM cards are available for purchase at large electronics stores such as Best Buy, department stores such as Walmart, as well as many chain grocery stores and pharmacies. Most major cellular service providers offer one or more prepaid options.