A mobile phone contract is the default option for many users. With mobile networks, handset deals and contracts all part of the mix, a huge choice faces would-be customers.
A mobile phone comparison service can help users to track down the best deal for their needs.
What is a mobile phone contract?
A contract phone deal means paying a fixed monthly price covering the key combination of:
Some monthly contracts include an upfront cost on top of the monthly payment, especially if you opt for an expensive handset. Other deals charge more for the upfront cost, but feature a lower monthly outlay.
Mobile contracts are normally for 12, 24 or 36 months and the deal means that you can keep the handset at the end of the stipulated period.
Should I get a contract?
Mobile phone contracts make life affordable enabling you to spread the cost of a new smartphone, so you won’t need to spend hundreds, possibly thousands, of pounds upfront.
Some contracts come with free gifts such as gadgets, or even a cashback option. Others offer network-related perks. O2 customers, for example, can access faster queues and exclusive bars at O2 venues.
If you have a poor credit file, paying a mobile phone contract on time each month can help you build a positive credit history.
Some contracts allow you to upgrade your phone before the end of the contract, so you can always have the latest handset.
Related: Compare Monthly Contract Phone Deals
What are the downsides of a contract?
If you buy a contract mobile phone you’ll be tied into a contract with the network for 12, 24 or 36 months, depending on the contract.
If you want to leave the contract early, you’ll have to pay exit or penalty fees and these can be very expensive. You might want to get out of the contract early if you don’t like your handset, the network coverage isn’t adequate in your area, or you find it too expensive. The more research you do before choosing a handset, the less this issue is likely to arise.
You normally need a decent credit history to get a mobile phone contract as you are given the handset upfront and will effectively be paying for it in instalments. If you don’t have a good credit record, you might be turned down for a mobile contract which includes a pricey handset.
If your contract doesn’t have a high enough call, text or data allowance for your needs, you’ll be charged extra for exceeding your limit.
What is a SIM-only deal?
SIM-only deals offer an alternative to mobile phone contracts.
As the name suggests, SIM-only mobile plans just come with a SIM (subscriber identity module), not a handset. The SIM is the small plastic card provided by your network that slots inside your mobile phone and makes it work.
With a SIM-only deal, you’ll need to provide your own handset. You can use a handset you already own, or buy a new one from a retailer or supplier.
Any handset will need to be ‘unlocked’ to work on a different network from the one you bought it from originally. Some phones are sold unlocked, while you’ll need to pay about £10 for others to be unlocked.
From December 2021 networks will only be allowed to sell unlocked phones.
What should I look for in a monthly phone contract?
Length of deal: Mobile phone contracts tend to be for 12 or 24 months, while a handful are for 36 months. You’ll be tied into the contract for this time period, so think carefully.
In most cases, you’ll struggle to get out of a contract early without paying a penalty and you might not be able to upgrade your phone within this period.
When the minimum term of your phone contract ends, you’ll need to take action. At this point you will have paid off the cost of the handset, so if you do nothing and carry on paying the same amount, you’ll be wasting money.
When your contract ends you could either take out a new contract with a new handset or keep your handset and get a SIM-only deal (this will tend to be cheaper).
Type of phone: Which handset you get is a major factor when you choose a phone contract. Your whole life is on your phone these days so it’s important to get the right one.
The cheapest handsets have a ticket price of under £100, although top-of-the-range models easily exceed the £1,000 mark.
There are plenty of brands to choose from including familiar names such as Apple, Samsung, Huawei, Motorola and Nokia. If you want your handset to work with other gadgets such as smartwatches or smart speakers, you’ll need to check compatibility.
You should also think about whether you want your phone to come replete with the latest snazzy features including facial or fingerprint recognition, wireless charging, and waterproofing.
Then there’s the phone’s camera: a big decider for many people. Some flagship phones have telephoto and ultra-wide lenses, as well as front and back cameras.
Airtime allowance: Mobile phone contracts come with an airtime allowance and this is usually split into three components:
GBs of data
You should look for a contract which includes enough of each for your needs. If you use more than your allocation, you’ll have to pay extra.
Data will be the big decider for many people. Data allowances on contracts vary widely and excess data charges can be expensive. Some contracts offer as little as 500MB, while others include 100GB. You can look at your previous bills to see how much you normally use.
Network: There are four UK networks: O2, EE, Vodafone and Three. Other networks ‘piggyback’ off of these networks and use their infrastructure.
If you’re switching to a different network, you should check the network coverage where you live and the places you regularly visit before going ahead. If you don’t, you may find yourself locked into a phone contract where you receive a poor signal.
Most areas have decent 4G coverage while 5G, the latest generation of wireless technology, is currently being rolled out across the UK. You’ll need a 5G handset and tariff to benefit from using 5G connectivity.
If you’re a regular traveller or holidaymaker, you should look at the cost of using your phone abroad.
Costs for using abroad: Using your phone overseas is known as ‘roaming’ and can come with extra costs. An EU rule called ‘Roam Like At Home’ means that mobile networks must charge mobile customers UK prices for calls, texts and data when they go to any country within the EU, plus Norway, Iceland and Liechtenstein.
The UK has now left the EU but networks are likely to stick to this rule for the foreseeable future – although this isn’t definite.
Either way, Brits travelling further afield than Europe are at risk of running up big phone bills. How much you’ll pay for data outside the EU depends on your mobile network and where you go, but some providers charge up to £8 per MB of data in some destinations.
Some networks offer tariffs which allow you to Roam Like At Home in extra countries outside the EU. These plans can be great if you travel a lot.
Travel ‘bolt-ons’ are another option with most networks. For a flat daily fee, a bolt-on either lets you use your normal allowance in certain countries, or gives you a new daily allowance to use while abroad.
How to work out the cheapest phone contract
Some mobile phone networks or re-sellers will tempt you to take out their products by offering free gifts or cashback. While these deals can be tempting, make sure you’re not paying for a more expensive mobile contract when the gift might be cheaper to buy separately.
When comparing the cheapest mobile phone contract deals, you need to do a proper cost analysis to work out the cheapest deal.
To do this, add up the monthly costs over the contract term, add on any upfront costs, deduct any cashback or rewards, then divide the figure by the length of the contract to get an effective monthly cost.
For example, if a 24-month mobile contract costs £50 upfront, £25 a month, and comes with £80 cashback, the effective monthly cost will be £23.75 (25 x 24, +50, -80, ÷24).
Mobile phone comparison services can help you find the right handset, network and airtime tariff, at the right price.
In some cases it might be easier to work backwards. Work out how much you can spend on your mobile contract each month, then look at what you can get for your money from different providers.
Related: Compare Monthly Contract Phone Deals