How Do Deposits for Cell Phone Companies Work?

Basics

Cell phone companies tend to require deposits to start service when there is the presence of bad credit or no credit history at all. This is a source of protection for the company, in case the bills are not paid as agreed. It is important to understand how cell phone deposits work when one is asked of you to complete a purchase.

No Credit

When a consumer has no credit, she is still a credit risk. A cell phone company will usually ask for a modest deposit, such as $150 to $300, to secure the line. This is not used toward future bills but is held in case the account is closed without notice or bills are not paid. Some deposits can be reconsidered after 6 months to a year of on-time payments, while others will remain on the account for the life of the contract or line.

Bad Credit

Those with bad credit may need to pay deposits closer to $500 to $1,000 to get a cell phone, because their history already shows a high risk of defaulting on loan and bill obligations. Some cell phone companies may also outright deny service, requiring the potential customer to either get a prepaid cell plan or go to another company. If a deposit is accepted, it also cannot be applied toward future bills but secures the account in case of sudden closure or unpaid transactions.

Alternatives

Prepaid cell phone plans are usually the best alternatives to transactions requiring a high deposit. These phones only work when money is loaded to the phone, usually in-store or using a gift card. Most of these phones have monthly plans and text messaging, making these an affordable alternative to extensive deposit requirements that some cell phone companies place onto those with no credit or a bad credit history.