What does an “Unlocked cellphone” mean?
Most of the cellphones may come with an internal lock that limits its compatibility with certain carriers. This needs to be considered at the time of purchase to avoid expenses on features that may not be used or be usable. Although the DMCA (Digital Millennium Copyright Act) was passed in 1998 to control piracy of CDs, somehow unlocking of cellphones also has come under this law.

An unlocked phone or a “no contract” phone means that the device is not restricted to any particular carrier and the consumer can use the services by any wireless carrier of his choice just by inserting a SIM card. Unlocking the phones without proper permissions is considered illegal and consumers trying to do so may have to pay fine and be sentenced to prison. However, range of pre-unlocked cellphones are available in the market today giving greater flexibility to consumers in terms of switching between cellphones based on newer launches, latest features, resale value, for using devices received as gifts, and the ability to jump to a carrier that meets his/her choice.

How to use cellphones without contract with a prepaid plan?
Prepaid plan means paying a defined amount in advance to the services offered by the carrier. The services cease to work either after the set data/service is consumed or after the time period for service expiry is crossed, whichever is earlier. The services have to be paid for once again to resume the usage which is commonly called as a top-up.

A top-up can be done through various modes. There are walk-in vendors from where a suitable service plan can be activated or bought online through the carrier’s website using the PayPal, net banking, or debit or credit card options. Some carriers also offer the “Auto Pay” option in which the prefixed cost will automatically get deducted from the linked account to avoid undisturbed services if one forgets to get the top-up done on time.

Factors to consider while choosing a carrier:
If you are comfortable with any of the big carriers (T-mobile, Sprint, AT&T, Verizon), then you can check on the MVNOs that run using their networks which can provide similar service at a cheaper price. Although dying, CDMA is a commonly used network in the US but the GSM (offered by T-Mobile and AT&T in the US) standard is the most preferred internationally.
If you are a frequent traveler, a GSM phone gives you flexibility in choosing the locally available network and thus help you to cut on your roaming fees. The LTE and HSPA platforms provide better speed if your usage is high on the browsing features.
The compatibility between the phone and the carrier should be confirmed before buying as some features in the phone may not be supported. For example, voice and texts may work but with the internet running at reduced speeds.