As the cost of the latest mobile phones increases exponentially (see the whopping price of the new iPhone!) more and more mobile users are switching to SIM only contracts at the end of their current deal. Previously mobile users would look to upgrade their handsets every 12 or 18 months as new exciting handsets with incredible new features were released on a regular basis. As the pace of technological development has decreased (is the iPhone 8 really much better than the iPhone 7? or the Samsung S8 vs the S7?) we are seeing mobile users hang onto their phones for longer and this is driving demand for SIM only deals.
In addition, we have seen an increase in customers being refused a contract with a new handset because of failed credit checks. This is only going to get worse as the cost of new handsets increases. Only those with the very best credit scores will be getting a free iPhone X anytime soon!
What is SIM Only?
As the name suggests, SIM only deals involve the mobile network providing you with a SIM. You need to provide your own phone or buy one from them. You then pay for the minutes, texts and data you want, either on a pay as you go basis or via a monthly contract.
Pay Monthly Contracts
This option allows you to sign up for a package of calls and data at an agreed price. As you are paying monthly in arrears you will likely undergo a credit check to satisfy the provider that you are capable of meeting your monthly commitments. When approved you will pay (via direct debit or credit card) on an agreed date each month for your package. 12-month contracts are the most common but 24-month contracts are also available. There are literally hundreds of different packages available in the market with different amounts of free minutes, texts and data.
Pay As You Go
This option allows you to pay in advance for your calls, texts and data at an agreed price. You add an amount of credit to your phone which becomes your balance. This balance is reduced as you use the phone. As you are paying in advance no credit check is required. There is also no contract meaning you can stop using the SIM card at any time.
Benefits of SIM only
SIM only contracts are generally much cheaper than a traditional mobile phone contract. Thie main reason for this is you will be expended to use your existing phone or buy a new one. As the monthly value of the contract is lower it is much easier to pass a credit check and sometimes there will be no credit check at all. They are much much cheaper! Pay as you go means no commitments whatsoever while even monthly contracts can tie you in for as little as 1 month.
Should You Switch?
One of the things that frustrate's us most here at TheMoneyDaily.com is when people come to the end of their 12 or 24-month phone contract (a contract that included a free phone) and don’t renegotiate or switch to a SIM only contract. The cost of the “free” phone is tied into the monthly payments which means when the contract comes to an end the phone is paid for and you no longer need to pay the same amount each month. It’s estimated that £355m a year is wasted in the UK as a result of mobile phone users not switching to SIM only or renegotiating their contract at the end of the initial period.