It's like a prepaid debit or gift card. You buy a phone card, put the credit on your phone, and when you have used it all up you can't use the phone again until you purchase a new card or call customer service and pay via phone. They work alright if you just want a simple phone for some calls and texting. Many don't have vast coverage areas and the ones that do like Verizon are kinda pricey. Depending on what you do with the phone a contract plan can sometimes be cheaper.