Types of Mobile Phone Contract

There are two different ways to pay for your mobile phones call and service charges. You can either choose to be billed monthly, or you can just pay for your calls as you use them.

1. Contracts

Committing to a contract will usually require you to sign up for a minimum of 12 months. Monthly line rental will cost anywhere from £15 to £100, with a wide range of call-plans available. Many packages include some inclusive call minutes (usually calls to fixed lines or to mobiles on the same network, but may include 'cross-network'). The advantage of buying a new phone with a contract is that the network will subsidise it quite heavily, to the extent that some phones may be offered free of charge with particular plans.

Do bear in mind, that if you lose or damage your phone, you will still be expected to pay your monthly fee until your contract expires.

2. Pay As You Go (PAYG)

With Pay As You Go, you make one payment up front for the phone and the line, and then buy vouchers or credit your account as needed to make calls. You can 'top-up' your phone in a number of ways: online, through your mobile, top up card, voucher or at an ATM. However, some Pay As You Go companies (such as 3) set an expiry date on their credits, meaning that the credit must be used in the time allocated - usually with 30 days of activation. For example, to keep a 3 phone activated, you have to top it up every month with at least £15 credit: if you're spending that much every month, you may be better off on a contract.

Pay As You Go is a cost effective option if you only expect to use your mobile occasionally, or if you expect to receive many calls, rather than make them. It is also an excellent choice for those on a budget, or for parents buying phones for children and teenagers, as call costs will never be permitted to spiral out of control.

The network subsidy on this type of phone is considerably less then pay monthly, so purchase prices are often many times higher than for pay monthly phones.