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  By Mark Hooson,  Author
Nov 3, 2021

Choosing From Sim-Only, PAYG & Contract? Find The Best Method For You

There are three ways to manage your mobile phone bills: a pay monthly contract, a pay-as-you-go (PAYG) arrangement, or a SIM-only deal. Here’s a look at the key differences to help you choose the right one for you.

Your handset

With a pay-monthly contract you are provided with a new phone – but it’s by no means free.

On a contract, your monthly payments go towards your monthly texts, calls and data allowances plus payments towards the cost of the handset. It means your monthly costs are higher than they might be via PAYG.

With a monthly contract you may have to pay an amount upfront, especially for a newly-released phone model. But with most such contracts, there’s either nothing or relatively little to pay upfront.

You’re effectively spreading the cost of the phone over the term of the contract, which is typically between 12 and 36 months, with a low initial outlay – or none at all. For many, this can be the most cost-effective way to manage a mobile – particularly if you want one of the latest or most expensive handsets.

A PAYG-with-handset deal give you a phone and a SIM, but the cost of the SIM card is nominal. Depending on the handset you want, your initial outlay could be significant. Some of the latest smartphones are selling for £1,000 and above.

SIM-only deals are designed to be used with a handset you already own. You may have bought it outright, on credit or even still have it from a previous, expired contract. Either way, all you get from the network operator is a SIM card to use in it.

Your payments

With a pay-monthly contract, you’ll sign up for fixed payments agreed in advance with the network operator. In return you’ll get a handset to pay off over the course of the contract plus monthly allowances for calls, texts and data. Payments are taken via direct debit from your bank account once a month.

Some operators allow you to pay off your handset in full at any time, or to make overpayments until your handset balance is cleared.

Unless you choose a tariff with unlimited allowances for calls, texts and data (or you set caps for each), you’ll be charged for your usage beyond your monthly allowances.

With PAYG, you prepay your bills. You can top up your balance online, by phone or at the checkout in selected stores and then use your handset as you would any other until the balance is spent. You can also link your SIM to a debit card and have your balance automatically topped up when it runs out.

SIM-only payments work much the same way as a pay-monthly contract. An agreed amount is taken from your bank account each month in return for usage allowances for minutes, texts and data. Use more than your allowance and you’ll pay your network’s standard rates for calls, texts and data.

Your usage

Many pay-monthly and SIM-only deals impose no limits on calls and texts. The pricier ones also place no limits on data. The rest will limit your calls to a given number of minutes each month, your texts to a certain number and data to a set amount, measure in gigabytes (GB).

PAYG deals have set charges per minute for calls, per text and per megabyte for data. Each minute, text or MB will deplete your balance until it reaches zero. There’s no credit facility so you can only spend what you pre-pay.

Convenience

Pay-monthly deals lock you in to a contract for a set number of months. During that time, you can’t leave your network without incurring a penalty. For longer contract terms, this could mean being stuck with what some would consider an outdated handset until it’s time to upgrade. That said, many pay monthly contracts allow for early upgrades if you clear your handset balance.

Pay-monthly payments are taken automatically and it’s possible to impose spend limits on your account so that you always know what your monthly bill is going to be.

PAYG deals don’t tie you into a contract. Since you buy the phone upfront, you’re free to take your business (and your handset) elsewhere whenever you like. For some, however, the need to make top ups may be inconvenient – though automatic top-ups could make things simpler.

If you have a handset you’re happy using, SIM-only deals offer a good balance of having monthly allowances and short contracts. The SIM-only option offers a credit facility so that you don’t have to worry about topping up but doesn’t impose the long contracts associated with pay-monthly deals, since you’re not paying off a handset balance.

It means you can, for example, take advantage of a deal with no limits on calls or texts without needing to get tied down for 12, 24 or 36 months.

Value for money

Pay-monthly contracts offer the best value for money because all the networks want you on their books for as long as possible. With such strong competition, the deals on offer often represent good value for money.

For example, if you’re a heavy mobile user, you could be sending hundreds if not thousands of texts in a month. Some networks charge 15p per text message. At 1,000 messages (or 33 a day in a 30-day month), you’d rack up a bill of £150. Sending the same number of messages on a pay-monthly contract with unlimited texts would cost much less, since they’d be included in your monthly bill.

The ability to spread the cost of a handset over 12, 24 or 36 months can also be appealing, especially if you’ve got your eye on an expensive phone. Be aware, however, that applying for a pay-monthly contract involves a credit check, since the operator will effectively loan you the cost of the phone and allow you to repay it over the contract term.

SIM-only deals represent the same kind of value for money as pay-monthly contracts, but only if you have a handset you’re happy to use. If you’re buying a handset to put the SIM card in, you’ll need to either pay upfront or use credit – but pay monthly contacts don’t tend to charge interest on handset repayments, so there’s likely no money to be saved.

PAYG can be one of the least cost-effective ways to manage your mobile, particularly if you’re a heavy user. Per-minute, per-text and per-MB charges can end up being quite expensive when there are pay-monthly tariffs without usage limits for a set monthly cost.

There is a slight exception in the form of ‘bundled PAYG’ deals. Some networks allow you to use your account credit to buy calls, texts and data in bulk rather than on a per-text, per-minute, per-MB basis. If you prefer or need to go down the PAYG route, this represents better value for money.

You’ll get a set amount of calls, texts and/or data for a set fee. There are even bundles with unlimited allowances. You pay for the bundle out of your credit though, so you still have the process of topping up your account.

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What are the best mobile phone deals?

The best mobile phone deals depend on a wide range of factors, from the type of handset you want to how you prefer to pay, as well as how you use your phone.

You could get a very cheap deal if you already have a handset to use and you’re comfortable with low monthly allowances for calls, texts and downloads – but that deal won’t be so good if you need a new handset and you use your phone for to send a lot of messages or stream a lot of video.

Deals broadly fall into three categories: pay monthly, pay as you go and SIM-only. With the first, you get a handset and monthly allowances for calls, texts and data. With the second, you get a SIM card that you credit in advance and used until your balance is used up. Finally, with SIM-only, you get a SIM card that offers monthly allowances for calls, texts and data in return for a fixed monthly fee.

There are hundreds of deals available in each category, and the best one for you will be the one that meets your specific needs for the lowest possible price.

How do SIM-only deals work?

With a SIM-only deal, you’re given a SIM card that grants you a monthly allowance for minutes, texts and data in return for a fixed monthly fee.

If you have a handset to put the SIM into, SIM-only deals are among the cheapest on the market, since you’re not paying the network for a device to use.

You’re billed on a monthly basis via direct debit and your monthly allowances restart each month rather than rolling over, meaning you can’t bank the unused texts, gigabytes and minutes from the previous month.

Once your allowances are spent, you’ll be charged the network’s standard rate for calls, texts and data.

SIM-only deals can be a very flexible option if you don’t wish to sign up for a lengthy contract. Many SIM-only deals operate on a rolling one-month basis, which means you can cancel at any time.

You’re also free to put the SIM card in other devices, provided they accept the sizing of the SIM card and aren’t locked to a specific, competing network.

How do phone contract deals work?

You agree to pay a network provider a monthly fee in return for a SIM card that grants you an allowance for calls, texts and data. Often, phone contracts come with a new handset, which is factored into the cost.

Contract terms vary, but typically span 12 to 36 months. If the pay-monthly contract comes with a handset, you won’t technically own it until you pay off the device component of the contract. However, you’ll be free to use the handset however you please, and many pay monthly deals allow you to pay off the handset before the contract term ends.

If you exceed your monthly calls, texts or data allowances, you’ll be charged at the operator’s standard rate for each, which tends to be more expensive than the effective cost of each within your allowances.

How do I get cheap mobile phone deals?

You can lower your monthly mobile phone costs by opting for a handset that hasn’t just hit the market. The latest flagship phones come at a premium that you can avoid if you don’t need the latest and greatest models.

In general, the more expensive the handset that comes with the contract, the more you can expect to pay each month. For this reason it’s worth exploring the market to see which manufacturers offer cheaper alternatives to the big-name must-have handsets. Manufacturers like OnePlus and Motorola, for example, have some great value, mid-range handsets.

The other way to cut costs is to carefully consider your monthly allowances. It’s easy to overestimate how much you actually need and simply pay for unlimited allowances for peace of mind.

Many smartphones keep a log of how many texts you’ve sent in the past month, along with how many minutes you’ve spent talking and how much data you’ve consumed. Check your settings for these logs and you can get a realistic idea of what you use and only pay for what you need.

If you already have a handset you’re happy with, a SIM-only deal can be a cheaper way to pay for your mobile phone use, since you’re only paying for the monthly usage allowances and not a handset.

But the best way to get cheap mobile phone deals is to use a price comparison service like ours rather than sticking with your current network and upgrading your handset. Since you can easily take your existing phone number with you to a new network, there’s no reason not to shop around for a more competitive deal.

How much phone data do I need?

This depends on what you use your phone for and how much you’re willing to pay. As you can imagine, tariffs with higher or unlimited data allowances cost more – but there’s no sense in paying for more than you need.

If you only really use your phone for calls and texts, and perhaps downloading the images people send you while you’re out and about, a 1 or 2 gigabyte (GB) allowance should suffice.

If you like to check in on social media while you’re outside your home or out of range of a wifi connection, and perhaps stream the occasional video, you may be better off paying for an allowance of between 2GB and 6GB.

Finally, if you stream a lot of high-definition music and video over 4G (or perhaps 5G) as well as using social media and other apps while you’re disconnected from wifi, you may need more than 6GB of data per month.

If you have a fairly recent smartphone, you’ll find logs of your data usage in its settings. They’ll show you how much data you typically use in a month to better gauge how much data you need.

Should I turn off mobile data when abroad?

Using mobile data abroad can be expensive unless you tariff offers free roaming or you’ve paid your network provider an additional fee for using your handset overseas.

If you do turn off your mobile data when abroad, you won’t be able to do much with your handset unless you connect to wifi. If your network doesn’t offer free roaming, you haven’t paid for some kind of international plan and you haven’t turned off data roaming, your phone will automatically connect to a local network – and that can become expensive.

Turning off your mobile data is simple. You’ll find a toggle switch within the network or SIM area of your device’s settings.

What happens when the phone contract ends?

Your phone will still work, and your monthly allowances will continue. The contract term you sign up for simply represents the earliest you can leave the deal for another without penalty.

Often, your network operator will contact you as your contract nears the end of its term to offer you an upgrade. These upgrades are priced deliberately to tempt you into renewing with the operator, and they’ll sometimes offer free gifts to sweeten the deal. However, it’s absolutely worth your time to compare deals elsewhere.

What credit score do you need for a phone contract?

When you apply for a mobile phone contract, the network provider or seller will check your credit score. They want to see how you’ve handled credit in the past so that they can make a decision as to whether or not to extend credit to you.

After all, when you get a phone contract with a handset included, you’re effectively borrowing the money for the device and repaying it over the course of the contract. The network will need some assurance that you’re a responsible borrower.

But the entire mobiles market depends on customers signing up for contracts, and so the acceptance criteria is less stringent than you might imagine. However, each network will have its own credit score criteria, so the better your credit score, the better your chances of being accepted.

Be aware that each time your credit score is checked, a record of the check is left on your file – visible to any other company that checks your score in future. Being rejected for credit on several occasions in a short space of time can compound the problem, so it’s best to wait for a few weeks after a rejection before your next application.

If you find your credit score is keeping you from getting a mobile phone contract, you can always opt for a pay-as-you-go deal (PAYG). With PAYG, you add credit to your account by phone or online and use your handset as normal until that credit is spent.

Once spent, you can top your balance back up and repeat the process.

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