A ‘free' iPhone with no upfront cost and 40GB of data for just £60 per month? Sounds great to a lot of people, but are contract phones the cheapest way to get a new phone?
Many consumers in the UK have only ever owned a mobile phone on a traditional contract – where you pay a set price per month for 24 months for an allowance of data, minutes and texts along with repayments for the cost of the handset.
Unfortunately, this isn't always the cheapest or financially savviest decision. That's not to say all contracts are bad, in fact depending on the handset, some of them offer great value for money, but you do need to know what you are doing.
This is where our guide comes in, and we'll tell you exactly which contracts make sense, which are ripping you off, where to find the best contract phone deals and the alternatives.
The traditional mobile phone contract is a relatively simple concept. First up, you choose a mobile network operator; then you decide the kind of phone you want, then you select the type of pay monthly plan that you want and finally, you sign a contract. You'll be paying a set monthly price, so you'll get a bill each month. Included in that monthly price will be a limit to the amount of calling minutes, text messages and mobile data that you can use.
Also in that amount is the cost of handset repayments spread throughout the contract. Back in the late 1990's deals were often 12 months, that soon increased to 18 and now the default is a 24-month contract.
The no upfront cost is a huge draw to many UK customers, but if you dig a little deeper, the actual price of the handset can be hugely inflated.
In fact, when carried out our cost of owning a mobile study last year, we found on a large number of deals it was actually cheaper to use alternative finance such as Apple's own offering or a loan at 30% APR.
So if you are shopping for a brand new shiny smartphone, you do need to weigh up whether a contract's really right for you. It's never one size fits all but in a lot of cases, you will be better off buying the phone outright and combining it with a SIM only deal.
Buying outright doesn't necessarily mean parting with up to £1000 in one go either. In the age of instant gratification, many consumers turn their noses up at the thought of saving up then forking out hundreds of pounds upfront, but via alternative means it is possible to get specific mobile financing – this can often work out cheaper than taking out a pay monthly contract, and depending on market conditions or credit available to you it can be borrowed at 0%.
We've told you why contract phones aren't always a good idea, but it's not entirely one-sided, there are benefits to signing up for 24 months. It's pretty convenient, for a start. You don't need to worry about running out of credit as you would with pay as you go, and you get yourself a shiny new mobile phone which in most cases comes with no upfront cost.
While this can often be an expensive way of doing things, depending on the handset you choose, there's also a chance that you'll get that phone cheaper than if you just bought it yourself outright. This varies and depends on how much the retailer is willing to subsidise the price of the phone. Our sim only vs contract calculator will run the numbers for you if you are unsure which is cheaper regarding buying outright or taking out a contract.
For heavier users, contract phone plans can also be cheaper because you're buying minutes, texts and data in bulk. You'll find that a 30GB data plan is a lot less expensive than paying individually for each megabyte on pay as you go, for example. That's not to say it will beat a SIM only contract, however, so you need to run the numbers using our calculator above.
Finally, depending on the retailer or network you'll probably be offered some sweet freebies. Free services when you sign a contract are pretty standard such as O2's Priority Moments or Three's Wuntu App. Don't get too wrapped up in freebies though and they should never be the deciding factor when it comes to signing on the dotted line.
If you are currently paying for a mobile contract and you're outside your minimum term (usually 24 months), then you should stop immediately. By continuing to pay you're effectively paying for a handset you've already paid in full for. OFCOM recently fined two networks for failing to inform customers their contracts had reached the minimum term, a case which further highlights the growing problem of ‘rip off Britain'.
When your contract has reached the end of its minimum term, and you're happy with your existing handset, you can switch to a sim-only deal or a pay-as-you-go SIM. By doing this you will slash your monthly bill.
Contract phone shopping isn't quite as complicated as some people make it out to be, though. There are only three basic steps. Firstly, you'll need to decide what kind of phone you want. Have a look around, read some reviews, watch hands-on YouTube videos and see what takes your fancy.
Secondly, you're going to need to look at your usage requirements. As long as you've had a phone contract before, this isn't a big deal. You can just look at your old phone bills and estimate the number of minutes, texts and data you'll need. If you haven't had a contract before, then you can track your usage on pay as you go for a month or so to get a decent estimate.
Try to avoid bumper deals with allowances you might not really need. Do you really need 20GB of data? Most people don't use anywhere near that amount. We provide free advice to all customers who are unsure and the handy Bill Monitor will analyse your bills from the last three months to determine your average usage and suggest deals.
Thirdly, you need to decide on a network operator. Look at which operators offer the best prices on the size of contracts you're looking for with the handset that you want, and that's it, you're done.
If you decide to take your contract phone shopping offline onto the high street, then don't fall for the hard sell in-store by commission-hungry salespeople.
Never feel pressured into signing a contract and do your research online first, so you know what prices are achievable. The easiest way is to use our comparison tool which covers the entire UK mobile phone market including every network operator and reseller. Occasionally the reseller sites can offer better deals not available elsewhere, but make sure they're a legitimate outfit. If they're not on our provider's list, the chances are we don't know enough about them to feel confident recommending them.
When your phone contract comes to an end, the provider will usually get in contact with you to get you to upgrade to a new handset. This will tie you in for another 24 months.
It's easy to be lured in by the convenience of it all and the promise of a great deal. The sad reality is that for the most part, you'll be paying far more than a new customer would be. Put simply, the retailers never have your interests at heart, like car insurance renewals, they are banking on you not moving to a new deal or even looking at prices elsewhere. Do not be afraid to haggle or vote with your feet, shifting your number to a new network has never been easier.
If you're dead set on choosing a new smartphone, don't be suckered in by the marketing hype. There are lots of great options out there that aren't made by Apple.
Even if you only want an iPhone or Samsung Galaxy, consider going for a model that has been on the market for 12 months. The previous generation is always cheaper and virtually identical in specification.
It's also worth considering a refurbished phone. The name is slightly misleading as they are often handsets that have been returned by customers without ever being used. Since the box is open, they are available at a reduced price. You can use the filters on our comparison tool to filter between only new, only refurbished or show both.
Through legislation, the mobile networks are allowed to increase your monthly tariff price by up to the rate of inflation each year.
This is only if their terms and conditions stated this before you signed up. All the major networks except Tesco Mobile have this policy. So EE, O2, Three, Virgin Mobile and Vodafone can and do raise prices mid-contract from time to time.
Changes are made under the Retail Prices Index (a measure of inflation) in March each year. Some firms will choose not to exercise their right.
Given that most pay monthly deals come with a high-value smartphone as part of the deal, all providers will carry out a credit check before approving you. So if you have been struggling with poor credit, you might want to check your credit score before applying.
Nobody can tell you beforehand whether or not you'll pass a credit check for a contract phone, but it will give you a general idea of your score and any problems.
If you are unsure, you can always apply and see what happens. If you were declined then don't keep reapplying elsewhere, instead look into pay as you go sim deals that come with prepaid bundled deals, these are known as no credit check SIM's and other than simple checks against fraud they are a guaranteed pass.
It's possible to save more with cashback but they're not always straightforward. We've explained the common pitfalls in our in-depth cashback guide but in short, there are two types to be aware of:
The most significant savings are on ‘cashback by redemption' deals through reseller sites. Redemption deals require you to send off your bills at regular intervals throughout your contract to get paid in instalments. Miss a deadline or send the wrong bill and you'll lose out on the cashback.
Automatic deals work by sending you a cheque automatically within a few months of taking out the deal. The savings aren't as good as redemption deals but there's no chance of things going wrong.
Our comparison filter lets you show deals that come with redemption or automatic cashback deals. You can also exclude them altogether.
You will need to think about a couple of other things, though. First, most operators are offering 4G data on their contract phone plans these days but not all. 4G will give you faster mobile internet, but not everywhere has 4G coverage. 4G data plans are also more expensive. If in doubt, use a coverage checker to find if you're going to get good 4G coverage.
You may also be offered a choice of contract lengths. Usually, more extended contracts are a bit cheaper each month, but you will be committed for a longer period. Finally, it's always worth being a little flexible about the handset that you want, since prices can vary quite a bit between models and network providers. Having a couple of options will mean that you have more choice and are more likely to get a cheaper monthly bill.
In a nutshell, a pay monthly contract phone gives you flexibility, easy payments, and larger monthly allowances. It also means you can get the latest phone without having to pay for it outright. But as we've mentioned, it's not the cheapest way of doing things.
Our most popular deals are the standard pay monthly deals that combine a set amount of minutes, text messages and data. With contracts starting from as little as £5.99 on some devices and the majority of phones completely free; you can be sure to find a contract phone to meet your needs.
You'll find a number of deals in our comparison engine that come with free gifts from smaller accessories bundled in like Bluetooth speakers to larger items like games consoles or laptops. These deals can look appealing on the face of it, but remember, in most cases, you will be paying for the gift as part of the monthly contract payments. You can read more about free gift deals in our explainer post and how to figure out if they represent good value for money.
TigerMobiles.com compare deals that have two choices to claim money back. If you want it instantly, we compare auto-cashback deals that get paid into your account instantly. If you’re after a cheaper monthly deal, you can also choose cashback by redemption where over the course of your contract you send in a bill and claim back your money at regular intervals. This opens the possibility of making some bigger savings.
Read more: Cashback Mobile Phone Deals Explained
We've got smartphones to suit every preference, but that doesn’t mean customers always know exactly what they want.
Luckily the customer service team here at TigerMobiles.com live and breathe mobile phones. We review phones in depth and pass that advice onto you.
So whether you have smaller hands and want a smaller “mini” phone. Or maybe you love the new larger bezel-less screen design and want to know which best suits your needs and budget – just consult our knowledge-base and ask a question or contact us via our contact form.