Smartphones have evolved radically and changed the lives of people. If you are from that techy bunch then you would like to buy a mobile that is the latest, appealing, and gives you the best value possible. You can also look for a phone on a plan and get some deals that are worth your time and money. So, what should you do? Should you go for a contract phone or buy a mobile phone outright?
Let’s first understand the difference between the two that can help in deciding which one is the best to choose?
Phone plan: If you want to buy a phone on plan then you will not just get a phone but will also get a connection. There will be a certain amount of free calls and text messages every month. Though this also means you need to stay with the phone connection company that you have signed up with and according to the contract duration you will need to stick with the same mobile plan.
This is somewhat similar to buying a car with a loan. In a phone plan, you can take the phone home and pay monthly installments for 12 months, 18 months, or 24 months. This depends on the contract length and just like the car is not yours until you pay all the installments, in a similar manner the phone is not yours until you pay all the installments.
Buying the phone outright: This means that you pay for the full handset at once or upfront. So, as soon as you pay the cash and get the receipt the phone is yours. Then you can choose any mobile phone company connection or mobile plan which fulfills your needs.
Which is the cheaper alternative?
- Contract phone:
A phone service provider is not making money from selling phones but they are making money from the services they offer like the network, phone plans, etc. In a phone contract, you do not have to pay for the mobile phone upfront but you may be asked to pay a certain amount of money as a deposit. However, this also depends on the type of phone you are purchasing and your credit history.
a. Going for a contract phone with good credit history: If you are purchasing an expensive phone and have a good credit history you may not be asked to pay a deposit and you can pay for the phone within 12 months, 18 months, or 24 months. This depends on the duration of the contract. If you do not want the contract then breaking the contract in the middle of the contract means you have to pay early termination fees along with outstanding phone payments.
You have to pay the remaining line rental for each month that is left. For example, you are in a 12-months contract with a phone company and you pay a line rental of £10 each month. Now, you have used the phone for four months and want to break the contract then you will have to pay the line rental for the remaining months which is 10×8 = £80 + any outstanding phone charges.
Sometimes this fee can be hefty if you have not completed a few good months in your contract. Switching to a new carrier can be very difficult and therefore you must read the terms and conditions of your contract to understand what are you signing up for.
b. Going for a contract phone with bad credit history: First of all, if your credit history is bad your application for a contract phone will either be rejected or you will be asked to pay a heavy deposit. The terms and conditions will also be very strict. The other thing that you can do is look for contract phones online as many phone companies are ready to offer phones to those who have a low or bad credit score and are not in a position to pay the deposit.
There are no deposit mobile phones offered by these companies where you can get the latest smartphone as a contract phone. However, their terms and conditions are different. You should also be registered on the electoral roll and have a bank account, but the good thing is you can get mobile phones on contract bad credit as per your needs. You can get some cheap contract phone deals but you must compare the pans of different providers online to make a suitable choice.
Outright mobile phone:
You can save money if you go for a phone upgrade and choose a phone outright. You will incur a heavy cost here because you will be paying for the phone upfront. You will have the freedom to shop for SIM-only plans or Pay As You Go (PAYG).
- SIM-only plan: In SIM-only plans you are only paying for the SIM card and you know how you are spending each month on the phone plan till the time you are not going over the monthly allowance. There is no commitment so you can cancel anytime.
- b) PAYG (Pay As You Go): You can also choose pay as you go plan where you have to recharge your phone or get a top-up done as soon as the credit is used. You can cancel the plan without any charge.
So which one is better?
This depends on the needs of the buyer, but a contract phone is much feasible and cheap. It is because you do not have to pay a hefty deposit and secondly you get a plan where every month you get free calling, free texts, and free data. You do not have to worry about running out of credit and can manage the payments at a low amount every month. The only thing you should take care of is read the terms and conditions properly and choose a plan that suits your needs so you do not get billed unnecessarily. Keep a track of your billing and phone usage so you do not goof up with your monthly payments.