If you’re in the market for a new phone, there are a few different options available to choose from.
You can either sign up for a contract with a handset included, or you can buy a phone and get a SIM to put in it.
But which is the best choice?
What’s the Difference Between Contract and SIM-Only Plans?
With a pay monthly smartphone contract, you will typically pay a fixed amount every month for a set amount of time, usually 24 months. Depending on the handset that you want to get with your contract, there’s usually no upfront payment or a relatively small deposit to pay when you sign up, although some networks do give you the option to pay an upfront fee in return for a cheaper monthly rate. Your monthly bill will include both your mobile tariff and cover the cost of the handset.
On the other hand, a SIM-only plan will only cover the cost of your mobile service. You will only be paying for the use of the SIM for minutes, texts, and data, as the name suggests. This is an ideal option if you already have a smartphone that you are happy continuing to use, or if you are in a position where you can purchase a phone outright. It’s a lot less to pay every month and you’re usually not tied into a lengthy contract, but it can be more expensive initially if you need to buy a phone.
So, which should you go for?
SIM-Only: Pros and Cons
SIM-only contracts are an easy, cheap option but there are plenty of pros and cons to consider before you decide if it’s the right option for you.
Pros of SIM-only:
Generally, it works out cheaper overall to have a SIM-only contract. You won’t need to pay any interest on paying for a phone handset monthly and you have more options available when purchasing your handsets, such as opting for a refurbished or second-hand phone, which can save you quite a bit.
Your monthly bills will also be lower compared to getting a phone contract. Since you’ve already bought your handset you don’t need to cover the cost, and you can take advantage of some dirt cheap sim only plans, which start from just £5 per month.
There’s less commitment, too – when you sign up for a SIM only contract, you can usually leave whenever you like. Lebara SIM-only plans run month-by-month, so you’re not committed to paying them anything for any length of time and you are completely free to try out another network next month if you please. You can also adjust the amount of money that you want to pay for your phone each month. For example, if you’re going to be using your phone a lot one month, you can sign up to get unlimited texts, minutes and data for the month from Lebara, but you are free to downgrade again to a cheaper package the month after, so it’s definitely much more flexible.
You can also sign up without a credit check if you are concerned that your credit score is not going to be good enough to pass when applying for a handset contract.
Cons of SIM-only:
Generally, the only downside to signing up for a SIM-only contract plan is that you won’t get a phone included. So, it’s only suitable for you if you already have a handset that you plan to use, or if you are happy to purchase a phone outright. You might also want to consider purchasing a handset through hire purchase or on a credit card if you would prefer to spread the cost and get a SIM-only contract to use.
Mobile Contracts: Pros and Cons
Mobile contracts are a popular option and usually the best way to get your hands on the latest smartphone releases without having to pay a huge amount of money upfront. Again, there are some pros and cons to consider before you decide if this is the best option for you.
Pros of Mobile Contracts:
When you opt for a mobile contract, you usually don’t have to pay a lot initially. In fact, some contracts do not require you to make any upfront payments, so they are ideal if you want to get a new handset and spread the cost over the next couple of years.
You can also get a phone immediately when you sign up for a contract; there’s no need to save up beforehand to be able to afford the phone, as would normally be the case if you were buying it outright. Since the costs are spread out over 24 months, it can be more manageable.
You can often get great deals on mobile contracts, especially if you are signing up as a new customer of a network. Some contracts even allow you to get other tech items included, such as AirPods, laptops, iPads, and gaming consoles, which you can also spread out the cost of over your monthly plan.
When you stick with a mobile contract, you can usually upgrade your phone every two years, allowing you to get access to the latest releases without having to worry about saving up for them.
Cons of Mobile Contracts:
Over the long-term, mobile contracts tend to cost you a lot more than purchasing a phone outright and getting a SIM-only deal, especially if you buy your phones refurbished or second-hand. Since you will typically get a brand-new phone with a mobile contract, you’re always going to be paying the maximum for them, compared to the savings that you could make if you purchased a preloved handset upfront.
You will also need to pass a credit check in order to get a mobile contract since it is effectively a hire purchase agreement for your handset. This means that if you have a poor credit rating or you already have a lot of credit that you are repaying, your chance of being accepted for some mobile contract deals are slim. It’s unlikely that you’ll be able to get the latest iPhone on contract with a bad credit score, for example, meaning that you might have to settle for an older phone.
Another downside to contracts is that you are tied in for two years. If during this time you break for your phone, for example, you will still need to continue paying for it until the contract is up. If you don’t have smartphone insurance and you need to replace your phone due to water damage, the cost of this on top of your contract will soon add up.
Deciding whether to get a contract phone or a SIM-only plan is completely up to you and will depend on a number of factors like your personal circumstances, the kind of phone that you want, and the amount of money that you have to spend. Consider whether making short-term or long-term savings are important to you and how quickly you would like to be able to purchase the phone before you decide which is the best option for you.
Both contract and SIM-only plans have a range of advantages and disadvantages, so it’s down to you to determine which option is best suited for your requirements when getting a new phone.