What is a contract phone?

Contract phones refers to handsets that are sold by networks as part of a deal that also includes monthly allowances of data, calls and minutes. When you buy a contract phone you're effectively paying for the phone in instalments, usually over a period of 24 months.

Depending on the contract you choose, you may have to pay something upfront too to help cover the cost of the phone.

If you opt to pay something upfront, you'll usually benefit from lower monthly premiums and will pay less in total over the course of the contract term.

Nowadays, more and more Britons have shunned traditional phone-and-tariff contracts and are instead buying a phone SIM-free and then signing up for a SIM-only deal.

While this can save money, it means having to stump up hundreds of pounds upfront for the phone. That's the kind of money that not everyone has to hand.

For that reason, phone-and-tariff contracts that spread the cost of the phone over a longer period are still the way that the majority of people choose to buy a handset.

What does pay monthly mean?

When you take out a pay monthly phone, you'll have to sign a mobile contract, tying you to that provider for a certain amount of time.

You'll pay a fixed amount each month for a designated amount of inclusive minutes, data and texts, which will also allow you to pay for the phone in instalments.

Anything you use outside your pay monthly allowance will be added to your next bill.

What are the pros and cons of pay monthly mobile contracts?

As we mentioned above, there are some very good things about pay monthly mobile contracts.

For one, they allow you to spread the cost of your phone, so there's no need to find a lump sum of hundreds of pounds. Or more than £1,000 if you want a top-of-the-range iPhone.

On certain pay monthly contracts, you'll also benefit from early-upgrade schemes, such as O2 Refresh or Sky Swap.

These allow you to swap or trade-in your existing phone for the latest model mid-way through your contract. So you won't be stuck with last-year's phone when it's superseded by a new version.

But pay monthly phone-and-tariff contracts aren't all good.

When you do the maths, it's pretty much always cheaper to buy a phone SIM-free and then sign up for a keenly priced SIM-only deal than it is to buy the same phone bundled with a contract.

And it's not just a bit cheaper either. Uswitch research found that you can save hundreds of pounds by following the SIM-free and SIM-only deal route.

Finally, buying a phone on a contract also means you're tying yourself in for up to two years.

If you find that your pay monthly tariff doesn't suit you, you should be able to switch to a more appropriate pay monthly contract without much bother.

But you'll still have to stay with your provider until your pay monthly contract has expired.

Conversely, if you've bought a phone with a one-month SIM-only deal, you'd be free to switch to a new, better deal with just 30 days' notice.

Want a new phone, but don't want to break the bank? Here's our pick of the best value for money smartphone contracts.

How do I pick the right pay monthly contract?

There are a few things you need to bear in mind before you sign up for a new mobile contract:

Network coverage

Some rural areas don't have the best mobile phone coverage, so check how your chosen provider fares before signing up for a pay monthly contract that could tie you in for as much as two years.

How you'll use your phone

The most important thing to consider when picking a pay monthly tariff is how you use your phone.

If you make a lot of calls, of course you'll want a tariff with a generous calls allowance. By the same token, if you text a lot, you'll want a hefty allowance of texts.

The good news is these days even cheap contracts give generous calls and texts allowances. And many actually offer unlimited calls and texts.

But arguably the most important thing to consider is how much you think you'll use your phone for online apps, such as streaming video and music, social media, email and browsing websites.

Networks are much less generous with data allowances and unlimited data contracts are harder to come by. If you want a large data allowance, you'll have to pay quite a bit to get one.

How much data do you need? We take a close look at data allowances for our guide.

How long do pay monthly contracts last?

Generally contracts last 24 months or 12 months. But the overwhelming majority of people choose a 24-month contract. And with good reason.

When you sign up for a 24-month contract you're spreading the cost over a longer term, so you won't have to find as much money every month to pay for your phone.

The downside is that if you do choose a 24-month contract over a 12-month term, you'll pay more in the long run.

It's also worth noting that on 12-month contracts, you'll usually have to pay quite a bit upfront to help cover the cost of the phone.

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