Contract Versus Pay As You Go

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Mobile Phones - Contract Versus Pay As You Go

Knowing the difference between Contract and Pay As You Go can sometimes be a difficult choice, if you make the wrong choice it can also be a very expensive decision.

While simsurprise.co.uk specialises in the supply of Pay As You Go SIM cards to the end-user market, we would still like to give all of our visitors a balanced comparison to the alternative - Contract.

If you decide to buy a Pay As You Go SIM card, we would like your decision to be based on balanced and informed information on the pros and cons of each - indeed that there is actually an alternative.

What is Contract ?

When you enter into a contract you are committing yourself to use a specific Network for a specific time at a fixed monthly fee.

For this fee you usually get a free, or heavily subsidised handset.

There is usually a set number of inclusive talk time minutes, and text messages, per month.

If you send more text messages, or talk for more minutes, than your free allocation you will be billed for those above and beyond your inclusive (free allocation) at the end of the month .

What is Pay As You Go ?

With Pay As You Go - sometimes abbreviated to P A Y G, you pre-pay for your calls and texts, typically using a top-up card that is connected electronically to your SIM Card.

You simply top-up your credit and your call and text costs are deducted from your credit as you send a text or make a call.

Sometimes the Networks will have special offers - for example top-up £5.00 and actually receive £2.00 free credit in addition - so in this example you get £7.00p credit for £5.00p. Or £15.00p credit for topping up £10.00p. And so forth - the more you top-up the more the Network will add to it.

Such offers, or promotions, can often be for a short time, or can be withdrawn at any time.

What are the advantages and disadvantages of Contract and Pay As You Go ?

Contract

Advantages:

• You usually get a free or heavily subsidised phone;
• A certain number of free talk time (minutes) and free number of texts included in your monthly fee;
• Beyond your free talk time and text allocation calls and texts can be cheaper than Pay As You Go;
• A wide choice of modern, top of the range handsets

Disadvantages:

• If you have a poor credit rating it may be difficult, or impossible, to obtain a contract;
• You are committed (tied) to paying a fixed monthly fee for the duration of the contract;
• Hundreds of inclusive (free) minutes of talk time, and / or texts, can sound very attractive - but unless you use all, or most, of your talk time and text allowance you are not making the most of what you are paying;
• Unused minutes from one month may not, and often do not, carry over to the following month - the same applying to your text allowance;
• You cannot cancel the contract if you have found a cheaper deal elsewhere;
• You cannot cancel the contract because you have "changed your mind";

Pay As You Go

Advantages:

• No monthly fee to pay;
• No nasty surprises in the form of a call bill - calls are paid for in advance through pre-paid credit;
• You are in complete control of how much you spend - top-up what you can afford, when you can afford it;
• No credit check;
• No commitment;
• You can sell your phone and buy another phone without penalties.

Disadvantages:

• You usually have to buy your own handset outright;
• Slightly higher call and text charges;
• If you run out of credit you cannot send text messages, or make calls except to the emergency services. Although people can still phone and text you;

How do I decide which is best for me ?

If you make, or are likely to make, a high number of calls or send a high number of text messages, or perhaps quite a few long duration calls then contract may work out cheaper.

However, if you don't mind perhaps a lower value, older, less versatile, phone and make only the occasional phone call, or send only an occasional text message, then Pay As You Go is most likely the best option for value for money.

If you can estimate the number of minutes per month you are likely to speak for then it would be worthwhile comparing Contract costs where the number of minutes offered free is about what you estimate you will speak for with the various tariffs for the same number of minutes.

Bear in mind that with Contract, you will pay the same monthly fee even if you have not, or do not, make any calls or send any text messages. Or the duration of calls is a lot less than your inclusive allocation.

With a Contract, you might be tied to the same Mobile Phone Handset for the duration of the contract.

Before committing to a Contract, there are some points you might like to clarify, or consider, before signing:

• Can you afford the monthly payments for the entire Contract term ?
• Are you tied to the same handset for the duration of the term ?
• Will your Mobile handset, and contract, contain the features and applications that meet your requirements ? For example: emailing or Internet browsing requirements.
• Can you upgrade your handset, or Contract call package, during the Contract term, and what are the costs of upgrading ?
• Is there a "cooling off" period where you can cancel the contract without any penalties ?
• Can the contract be cancelled within the contract term ? If so what are the penalties ?
• Is handset insurance cover included in the cost of the contract, or offered as an optional extra ?
• When your contract finishes, does the Contract automatically renew ?

Why clarify being tied to the same Mobile handset, or Contract call package, for the duration of your contract ?

Your proposed Mobile handset, and Contract call package, may have the features and applications which meet your requirements at the time of signing - but your requirements might change during the term of your contract.

For example, you might need to increase your inclusive talk time minutes or inclusive text message allowance.

Tip 1:

Any unused talk time, or text message allocation, may not get carried over to the following month - in other words - use it or lose it ! Tip 2:

Do not be afraid to seek independent legal advice before signing a contract.

The legal advice might work out a lot cheaper than committing to a contract that does not meet your needs and which cannot be cancelled.

Where can I go for independent advice on buying a mobile phone or getting a mobile phone contract ?

If you require independent advice on contracts, including specific clauses in a contract you have signed or are about to sign, buying a mobile phone, including your legal rights, it would perhaps be prudent to consult a qualified legal advisor, such as a Solicitor, or the an organisation such as the Citizen's Advice Bureau.

Also, an article that might be of some use which is produced by the Citizen's Advice Bureau which can be found at www.adviceguide.org.uk titled "Mobile Phones - What The Law Says" here.

Contract Cash-back Offers

The selling point for many contract packages includes a "Cash-back" offer.

Find out who is actually offering, and will be paying, the cashback - is it the Network or the shop who is selling you the phone / contract.

The terms and conditions for these offers vary from network to network, and package to package.

Typically the conditions for receiving cash-back include paying the full contracted monthly payment for the full term of the contract - this might be 12, 18, or 24 months.

To actually receive the cash-back you will typically have to supply bills and contract details at specified intervals during the term of the contract. These intervals may, or may not, be at regular intervals - for example they may be at 3 months, 5 months, 8 months, and 12 months. Or perhaps at 3 months, 6 months, 9 months and 12 months.

At the specified interval you will be required to supply the documents within a specific time frame - for example within one month.

When the company paying the cash-back receive the correct documents, in the correct time, they will then pay you the cash-back sum.

Payments may be by: cheque, payment into your bank or building society account, or perhaps a different method - check your contract - or perhaps it is better to ask before signing your contract.

So, for example, if you are required to supply the 3 month documents you will have to do so after the 3 month anniversary date, but before the fourth month anniversary date.

Your documents will normally need to be posted through conventional mail.

There can be a number of reasons why the network, or shop that sold you the contract, may not pay out. These reasons include (but are not limited to):

• Failure to supply the correct documents - the customer forgot to send them or decided not to bother !;
• Failure to supply the documents within the required time frame;
• Documents "Do not arrive";
• Another contractual failure on the part of the customer.

So it is very important to read the terms and conditions of the cash-back offer. Know what you are required to send, and when to send it as well of course know where to send the documents.

Remember: What When Where.

Many customers either forget to send the documents to decide "not to bother" - some networks or shops who sold you the contract who pay the cash-back rely on people who may forget to send the documents or who may decide not to follow it through by sending the documents.

Keep a written copy of the cash-back terms and conditions.

Cash-back Tips:

Read and understand what is required to qualify for cash-back payments.

Post documents by recorded delivery.

Know what documents to send, as well as when and where to send them.

While SIMsurprise.co.uk focuses on the supply of PAYG SIM cards to the end-user market we realise that you may be looking for a Contract or perhaps a Phone + SIM card combination in a single purchase.

Related Article

For more information and thoughts on "Unlimited" text, calls, or data transfer claims or packages, you might like to read our article Unlimited Or Fair Usage.

This article can be used on your own website, free of charge, providing this article is unaltered and the information and link in the box below is also included with the article.

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