Pay as you go vs Contract

Overview – What’s the difference?

Contracts

A mobile contract lets you choose a package of minutes, texts and data on a wide variety of handsets, including the very latest releases. You choose what's right for you. It also means you are contractually obliged to pay your mobile network a monthly fee, typically for a period of 12-24 months.

Pay as you go

Pay as you go is exactly that: you just pay for the exact amount of minutes, texts or data from the mobile network directly, as you go along. To make use of a SIM-only pay-as-you-go mobile phone deal , you would need to purchase (or already have) an unlocked mobile handset .

Pros and cons

When deciding if a pay monthly contract or a pay as you go plan is right for you, you need to weigh up the pros and cons of each.

Benefits of a contract

• Handset: With a pay monthly contract, you're not only paying for an allowance of minutes, texts, and data, but for also for the mobile phone itself. This allows you to spread the cost of an otherwise expensive handset over the length of your contract, while you can also upgrade to a newer model every year or two, depending on the length of your plan.
• Security: Pay monthly contracts almost always come with a warranty period, so you can see how it works for you. Furthermore, routine repairs to the handset are often covered by your mobile network at no additional cost, and you can also buy contracts with full insurance coverage - a great relief and saving for those of us who are accident prone!

If a contract is right for you, use our price comparison website to compare mobile phone deals and tariffs - this is the best way to choose what you want from your package.

Benefits of pay as you go

• Cost: As you're not paying off the cost of a new mobile phone with a pay as you go plan, your monthly costs will be a lot cheaper (as long as you're not using your phone excessively). You will need to already have a handset you're happy with, however, or you'll have to pay the full cost of your device separately. 
• Flexibility: With a pay as you go SIM, you're not bound by any network, as long as your handset is unlocked. Not being tied down to a lengthy contract means you can switch network whenever you like without paying any early cancellation fees.

Pay as you go vs contract: Which one is right for you?

You also need to consider what type of mobile user you are, i.e. what will you be using your phone for? 

Heavy users

If you use your phone a lot, then a contract is likely the right choice for you. Having a continuous text conversation or ringing a friend for a long catch-up all adds up in cost, and you could find yourself frequently having to buy more credit in order to keep active on your phone if you've chosen pay-as-you-go. Similarly, if you're a heavy social media user or video streamer, or someone who's on the go or not always connected to WiFi, then having a monthly data allowance is much more cost effective.

Light users

Conversely, if you just ike to check in with friends and family, send a few messages and are regularly connected to WiFi then maybe you don't need all that a contract offers - a pay as you go plan will work for you. Plus, if you're not so fussed about having the latest gadgets, then many of the older handsets are very affordable.

Travellers

If you frequently travel, or have to contact friends or family abroad, then a contract that includes international minutes can save you huge amounts of money when compared to a pay-as-you-go SIM, as this still carries a heavy cost.

What about SIM only contracts?

You can also consider a SIM-only deal as alternative. These have been gaining in popularity in recent years, and they are almost like a fusion between pay monthly contracts and pay as you go deals. 

With a SIM-only plan, you only pay for a monthly allowance of data, minutes, and texts that's loaded on to a SIM card - you don't get a handset as part of the deal. SIM only deals are available both on a rolling monthly basis or as part of a longer contract.

For more information on whether this type of plan is right for you, check out our guide on SIM only vs contracts.