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Cheap Mobile Phone Contracts: SIM-only vs. contract phone plans

Fiona Leake
Fiona Leake
  | Edited by Tom Church
Updated 12th August 2021

Getting a mobile phone usually also involves getting a mobile phone contract. In this guide, we will discuss the best and cheapest mobile phone contracts, helping you to choose the right phone contract for you.

What is a mobile phone contract?

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A mobile phone contract is when you pay a fixed monthly fee for a certain period of time, usually between one to three years.

In return, you’ll receive a handset and a monthly allowance of calls, texts and internet data.

Exactly what you get depends on which mobile phone contract you choose. Usually, you’ll decide which handset you want then pick a contract with an allowance that suits your needs.

However, not all mobile contracts come with a handset, it depends on which one you pick, we discuss the different types of contracts below. 

How does a mobile phone contract work?

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With a mobile phone contract, you pay for a set amount of calls, texts and data each month. If you exceed your allowance, these extra charges will just be added to your bill at the end of the month. 

If you have a contract phone, you will also be paying for the cost of your handset on top of your allowance each month. 

This means that your bill will include the following:

  • Your monthly allowance of calls, texts and data.
  • The monthly repayment of your handset. 

Mobile phone contract bills will therefore be the same amount each month. Unless, you exceed your monthly allowance, of course. Thankfully, most mobile providers do give you the option to cap your allowance. This means that you cannot exceed it and be hit with unexpected charges. 

The more calls, texts and data within your monthly allowance, the more expensive your mobile phone contract will be.

Different types of mobile phone contracts

Many different mobile phone contracts come with different perks and suit different needs. 

Contract phone plans

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One of the most common mobile phone contracts is the type that comes with a ‘free’ handset. Contract phone plans come with a smartphone and a monthly allowance of calls, texts and data. 

Often, you won’t have to pay any upfront costs, meaning the handset is ‘free’ to begin with. However, you will be repaying the cost of it each month on your bills. 

If you’re looking for the latest smartphone model, you might have to pay a small amount upfront before getting the handset. 

Contract phone plans have two charges each month:

  • The cost of your allowance of calls, texts and data. 
  • The cost of repaying your handset. 

The total amount depends on how expensive your handset is and how large your allowance is. 

Contract phones are so popular as many people can’t afford to buy a new smartphone outright and would prefer to spread the cost in a contract. These contracts last between 12 and 36 months.

SIM-only mobile phone contracts 

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A cheaper contract option is SIM-only. This is where you’ll only receive a SIM-card with a monthly allowance of calls, texts and data but no handset. 

SIM-only contracts are great if you already have a smartphone or have recently bought one outright. You can then only pay for your monthly allowance, rather than the cost of a handset on top. 

Often, once people have paid off their handset in a phone contract, they switch to SIM-only rather than upgrading to a new phone. 

This is because it’s much cheaper and is often more flexible with shorter contract lengths. If you have a perfectly fine working phone, consider a SIM-only contract.

Pay-as-you-go (PAYG)

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Pay-as-you-go plans aren’t technically contracts but they are worth covering. Pay-as-you-go tariffs work when you already own a phone. You can then get a PAYG SIM which you must top-up with money before you can make any calls, texts or use internet data. 

Once your money runs out, you must top-up again. 

PAYG plans are best suited to people who don’t use their phones that often and so don’t need to be tied into an expensive monthly contract with huge allowances. 

They are perfect for people who use their phone every now and then and so only need to top-up when needed.

Mobile phone contracts for bad credit

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No credit check phone contracts aren’t very common and most mobile contracts will carry out a credit check to ensure that you can pay every month. You might not be accepted for a phone contract application if you have a bad credit score.

However, some mobile providers might still accept you even with bad credit. If you pick an older, cheaper handset, you might still be offered a contract. Or, if you opt for a SIM-only contract without a handset, your application might be approved.

If not, you should take steps to improve your credit score and get a pay-as-you-go tariff instead.

Mobile phone contracts with free gifts

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When looking for your next mobile phone contract, one of the perks you can compare is the free gifts. These free gifts can sometimes include hands-free heads, accessories and games consoles such as the PlayStation 4 or Xbox One.

However, more common gifts these days are vouchers or cashback. 

If you’re stuck between picking contracts, look at what perks are available or even ask for some to be added!

Mobile phone contracts with cashback

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Some mobile phone contracts offer cashback as an incentive. The provider promises to pay you money back once you’ve paid a certain amount of money a few months into the contract. 

This means you can earn cashback by paying your mobile phone contract. This deal is usually reserved for the most expensive plans and phones and so might not save you much money in the long run.

Best mobile phone contracts

We’ve listed some of the best mobile phone contracts for the most popular phones below. Most of these deals are provided by third party retailers which are often cheaper than buying directly from the network provider.

Best mobile phone contract deals

Apple

Samsung

Best SIM-only deals

How to choose the right mobile phone contract for you

Choosing the right mobile phone contract is the key to saving money on mobile phone bills. Here are some things to consider before deciding on your perfect mobile phone contract:

1. Understand your usage 

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You’ll need to track how many calls, texts and data you use each month. Whilst going for the cheapest mobile phone deal possible is tempting, if the allowance you get isn’t big enough, it’ll quickly become very expensive. 

The cost of using extra data, for example, outside of your allowance, is incredibly high. This means that if you use a lot of data, paying for a contract that offers more each month, will work out cheaper than regularly exceeding your limit. 

Track your usage and pick a contract that meets your needs.

2. Pick the right contract length 

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You don’t want to tie yourself into a lengthy contract that spans several years. However, the best mobile phone contracts will want some level of commitment from you, usually a minimum of 12 months. 

Most mobile networks will offer you a choice of 12, 18, 24 or 36-month contracts. The longer the contract, the cheaper the monthly cost will be. This is why zero commitment contracts cost more each month, as you aren’t tied into an agreed time period.

Balance is key. 18 or 24 month contracts are ideal because you’ll get a good deal but you aren't tied down for too many years. Financial circumstances can change which is why you don’t want a mobile contract to exceed two years.

3. Use the internet to find the best mobile phone deals

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We’ve listed some of the best (and cheapest) mobile phone contracts above. You can browse those deals at your own pace and not make any rash decisions. When you go in-store, you’ll often be targeted by sales staff that want to make a commission. This means that they’re trained to persuade you to pick the most expensive contract.

Browsing online allows you to do your research and make an informed decision, saving you money and stress.

4. Decide whether you’ll use your phone abroad

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If you’re going to be using your mobile phone abroad at any point during your contract, make sure that reduced overseas tariffs are included in the deal. 

Data roaming abroad is very expensive, meaning that you could be hit with a nasty surprisingly expensive phone bill when you return. 

Before signing a contract, check whether there are any reduced rates for using your mobile abroad. 

5. If you already have a phone, consider going SIM-only! 

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If your current handset is working properly and isn’t an ancient flip-phone, then you probably don’t need to upgrade to the latest, greatest smartphone. 

You can get a much cheaper SIM-only contract which can see your monthly mobile phone bill being under £10!

If you want a SIM-only deal but don’t have a phone, you can find cheap ones on eBay. You can find a secondhand iPhone in great condition for around £100 - bargain!

SIM-only vs. contract phone plans 

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The main question regarding mobile phone contracts is whether you go SIM-only or have a contract phone. You can sign-up to a contract that gives you a handset, meaning that you’ll be paying for both the handset and your monthly allowances.

Or, you can buy a handset outright and only pay for your monthly allowance of calls, texts and data. 

So, which is the better option?

Pros of SIM-only contracts

  • Flexible - SIM-only deals can be as short as 30 days and allow you to choose your provider, meaning you can swap if you find a better deal. 
  • Cheaper - SIM-only deals are usually cheaper in the long run than contract phone deals. This is because you aren’t paying back the cost of a handset which is cheaper to buy outright.
  • Keep your phone - if you’re happy with your current phone, you can keep it! Just pop in the SIM card and you’ll be good to go. If you get attached to your phone, SIM-only is the way to go. 
  • Easier credit checks - most SIM-only contracts will carry out a credit check but the criteria will be much easier to meet than with contract phone plans.  

Cons of SIM-only contracts

  • Phones are expensive - SIM-only contracts only work for those who can afford to buy a smartphone outright. If you want a new model with the latest features, you could be spending over £1,000 in one go. 
  • Unlocked phone - if your phone is locked, you’ll need it unlocked to enjoy the flexibility of SIM-only deals. Unlocked phones mean you can choose whichever provider you want, making it easier to find the cheapest deal. 
  • Outdated phone - with contract phone plans, you can upgrade your phone every time the contract ends. If you love to be up-to-date with the latest tech, a SIM-only plan might not suit your needs.

Pros of phone contract deals

  • ‘Free’ smartphone - usually there’s a small amount to pay upfront on a phone contract but sometimes you can get your handset without paying anything. You will be paying back the cost of the phone every month but you can get a phone immediately without paying much if anything. 
  • Latest handset - you don’t have to save up for an expensive phone beforehand, so you can use the latest handset right away and repay the cost over time. 
  • Upgrade - if you stick with a phone contract, you can upgrade your device regularly. 
  • Build a credit rating - if you pay your bills every month on time and in full, you can build a strong credit rating.
  • Free perks - many phone contract deals come with extra perks such as cashback or vouchers.

Cons of phone contract deals

  • Restrictive - you’re tied down to the same mobile provider and deal for around two years minimum. If you spot a better deal, you’ll have to wait until you finish repaying the cost of your handset before switching. 
  • Credit check - phone contracts usually carry out tougher credit checks, meaning those with bad credit might not be approved.
  • High charges - if you exceed your monthly allowance of calls, texts and data, you’ll be charged high fees.

How to compare mobile phone contracts

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When comparing the best mobile phone deals online, you’ll want to look at a few things in particular: 

  • Allowance - does the monthly amount of calls, texts and data meet your needs? You don’t want to be paying for more than you need but also you need enough or you’ll be charged extra. 
  • Length of contract - try to pick a contract length of 18-24 months. This way, you aren’t tied down for too long. 
  • Cost - pick the best price for the allowance and device you want. 
  • Perks - are there any extra perks on offer that sets one contract apart from another?
  • Customer service - pick a mobile provider that has great customer service. This way, it’ll be easier to have any problems solved and to haggle for a better deal when the time comes.

How to get a mobile phone contract

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To get a mobile phone contract, you’ll need the following: 

  • Contact information (address, phone number, email).
  • Card details (if paying by Direct Debit).
  • Pass a credit check, depending on the contract and provider.
  • Read and agree to the terms and conditions.
  • Proof of address/identity (varies depending on the provider, could be card details, passport or utility bills etc.)

The easiest way to get a mobile phone contract is either online on the mobile provider’s website or over the phone. You’ll just need to provide the above information after you’ve picked the right deal for you. 

You can also apply for a contract in-store but beware of any upselling techniques where the sales staff might try to get you to spend more money. 

Are phone contracts worth it?

Phone contracts are worth it if they suit your budget and your phone usage. If you tend to spend less than £10 worth of calls, texts and data each month, sticking with pay-as-you-go is probably a good idea. 

However, if you use your phone regularly, then contracts are worth it. Your decision is then whether to get a handset or a SIM-only contract. If you love having the latest smartphone and can afford the cost each month, then a phone contract is worth it. 

If you’re happy with your current phone, then SIM-only will be the cheapest and best option for you. 

Just remember to pick a reasonable contract length, or you could find yourself tied down to one mobile provider for years.

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