Mobile contracts

Pay monthly contracts are offered by network operators to be beneficial both to them and to their customers. The customer must commit to a particular network operator for a specified amount of time – normally 12 months, although 18 and even 24 month contracts are becoming popular. In return, the customer can take advantage of special offers such as ‘free’ handsets and a certain amount of calls or texts included in the agreed monthly cost. Other special offers include free gifts such as car kits, games consoles and other accessories when you choose a pay monthly plan.

Customers who choose a pay monthly contract will receive a monthly bill in arrears from their network operator, which they can pay, either by Direct Debit or by another method when their bill arrives.

Advantages

• Call and text costs on pay as you go are typically higher than on pay monthly contracts, so if you make a lot of calls, send a lot of texts or like to access the internet regularly from your mobile, a contract is the most cost effective method of payment
• If you agree to a pay monthly contract, you can often get the latest phone models without having to pay the huge retail value attached to it, marketed as a ‘free’ phone
• Upgrading your handset is easier with a pay monthly contract. It offers you the possibility of upgrading your phone to a newer model when your contract comes to an end. Upgrading at the end of a contract can be free, depending on the handset you want, and if it’s not free, the cost will be heavily subsidised by your monthly line rental
• Monthly costs are usually fixed at a minimum amount but most network operators will allow you to change your tariff, if you find after a few months that it doesn’t suit you, or is too expensive

Disadvantages

• You have to sign up for a minimum period of 12, 18 or 24 months. If you want to change your network operator during the term of your contract, you can, but you’ll still have to pay your original network operator the amount you would’ve paid, had you stayed with them. So if you decide to change network operators you’ll have to pay two bills, until your original contract ends
• If you’ve signed up for a pay monthly contract and you don’t use your phone enough to warrant the monthly line rental, or if your circumstances change, you won’t be able to cancel
• If you move house and find that your network has little or no reception, you’ll still have to pay for your contract every month
• If you want to upgrade your phone before the end of your contract, you’ll usually have to pay an upgrade fee which can be costly, although the closer you are to the end of your contract, the cheaper this usually is
• Whilst handsets are marketed as free, the true cost is actually compensated for in your monthly line rental

Most phones come with a hefty price tag, especially if you want the latest in mobile gadgetry, so the premise of a free phone is incredibly enticing. However, you will have to agree to pay your network operator a set amount each month for a pre-agreed period, usually a minimum of 12 months, longer for some very new phones.

It’s possible to work out how much line rental you’ll have to pay over the length of the contract and then compare this to the cost of the phone. If it works out more expensive than the phone itself, weigh up how much you’ll use it and compare call costs to what you’d pay on a pay as you go deal - it may work out cheaper. uSwitch.com can of course do all of this for you!

There are three lengths of contract:

• 12 months: standard length and the minimum time you’ll be required to commit
• 18 months: offered with some deals, usually for new phones that haven’t been available for long – these are usually perceived to be cheaper than 12 month contracts
• 24 months: particularly common if you want the very latest handset without having to pay for it upfront i.e. included as a ‘free’ phone

What to do at the end of your contract? There are several options:

• simply continue paying on a month by month basis and your network operator will continue to send you your bills as normal
• upgrade your handset with the same network operator – you’ll have to start another pay monthly contract but you’ll get a new phone, often free
• switch network operators AND upgrade your phone – and why not let uSwitch.com help you make that decision?