Contract or pay-as-you-go – the cheapest phone deals

The majority of Brits now own a smartphone, and if you’re one of them, you might be on a monthly contract, in some cases costing you as much as £50 a month. If your contract is coming to an end, you could be thinking about switching to pay-as-you-go, where you’d just pay for what you use, but you might not be sure if it’s for you. Take a look at who could benefit from being on a pay-as-you-go deal – and who is better sticking on a contract.

Who could save on contract?

If you don’t want to keep your current phone, and you’re looking to upgrade to the iPhone 6 or the new Samsung Galaxy S6, you might want to pay for this as part of a contract. Although it’s generally cheaper to pay for a smartphone outright in the long-term than making small payments towards it over two years, coughing up £600 upfront is out of most people’s budget.

However, you could find it difficult to get accepted for a pay monthly contract if you’ve had problems with your credit score in the past, as this is something that the network providers look at when they’re deciding whether to let you take out a contract or not. If your credit history is less than stellar, it might be more suitable for you to look at pay-as-you-go deals.

It’s important to realise that while you’ll have a set number of minutes, texts, and internet data available on your plan, you can still go over budget. If you use more texts, call minutes, or internet data than your contract plan allows for, you’ll be charged extra, which could throw your budgeting plan off.

Who could benefit from pay-as-you-go?

If your current contract is coming to an end, and you’re happy to stick with the handset you’ve got, you might prefer the flexibility of being on a pay-as-you-go deal. There wouldn’t be any benefit in upgrading to a new phone if you still like the one you’ve got, as you’d pay more for this every month. On pay-as-you-go, you can often get as good a deal as you can on contract. For example, giffgaff currently has a ‘goodybag’ that gives you 1,000 minutes, unlimited texts and 5 GB 4G Internet for £18 a month.

With a pay-as-you-go deal, you’re not tied in for 18 months or two years, like you would be on a standard pay monthly contract. This gives you the freedom to switch if a better offer comes along, so it could be a good idea if you like to compare tariffs to check you’re getting the best deal. Another variation on this is a SIM-only contract, where you just pay every month and keep the same handset. You’re not usually locked-in, as SIM-only contracts generally roll over on a monthly basis, so you’ll still be able to change deals if you find it cheaper elsewhere.

However, it does mean that if you use up your text, call or data allowance, you won’t be able to use your phone until you top up. This isn’t ideal for emergencies, as it means you won’t have a functioning phone if you need to get in touch with someone. If you’re thinking of getting your kids their first mobile, you might want to get a cheap contract, rather than a pay-as-you-go deal, so you know they’ll always be able to keep in touch with you.