SIM-only vs. contract phone packages

A SIM-only deal allows you to pick the minutes, texts and data that you need, then either keep the mobile phone you have or shop for one separately. It’s an alternative to a monthly contract, which also covers the cost of a new handset.  

A SIM-only deal allows you to pick the minutes, texts and data that you need, then either keep the mobile phone you have or shop for one separately. It’s an alternative to a monthly contract, which also covers the cost of a new handset.  

Written by
Holly Cox
Insurance expert
Last Updated
3 MAY 2022
5 min read
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Could you save money on your mobile phone package?

Almost everyone living in the UK – 95% of us – use a mobile phone, with eight in 10 adults owning a smartphone in 2020. Our lives are now fundamentally connected to our devices. In 2018, we checked our phones on average every 12 minutes of the waking day. 

In between all that screen time, have you ever stopped to think whether you could be saving money on your current mobile phone deal? Now’s the time to weigh up the pros and cons of a SIM-only or contract deal.

What types of tariffs are there?

There are three types of mobile phone tariff: 

  1. SIM-only – this is a deal where you get the SIM card but not a handset. You’ll usually get a bundle of minutes for calls and texts plus a data allowance for a monthly fee. It’s useful if you already have a phone but want a better price for your data, texts and minutes. 
  2. Pay as you go (PAYG) – you pay only for your usage and top up credit as and when you need to. This type of deal is useful if you want to closely manage your costs and don’t use your phone very often. 
  3. Contract – you’re committed to an agreement for a certain amount of time, between 12-24 months, and pay a fixed fee every month. In return you get a handset – useful if you want the latest phone – and a set amount of texts, calls and data each month. 

The advantages of a SIM-only deal 

  • You’re free to choose a provider – most SIM-only contract deals mean you’re not tied to any one provider, and some contracts are as short as 30 days. If you don’t like the deal, you can swap (as long as you give notice as per any terms and conditions, you won’t be charged to change). 
  • It could cost less – SIM-only deals tend to be cheaper in the long run compared to contract agreements because you’re not paying back the cost of a new smartphone. 
  • You can stick with your phone – if you’re particularly attached to your phone you could keep it. Just pop in your new SIM (you might need to unlock your phone first) and away you go. 
  • Upgrade to a new device when you like – because SIM-only deals aren’t connected to a specific device, you could switch your SIM into a new phone and stay on the same deal. So, there’s no need to wait if you can afford to upgrade.   
  • More environmentally friendly - sticking with your old phone potentially means less electronic waste going to landfill. 
  • Less rigorous credit check – your credit history will still be checked, but the criteria you’ll have to meet isn't as comprehensive as a contract deal. 

The disadvantages of a SIM-only deal

  • Handsets are expensive – the cost of a phone on its own can roll into hundreds of pounds, especially if you like your phones loaded up with features. 
  • You may be locked in – you might need to unlock your phone if it’s tied to a network provider that’s different from your SIM provider. 

The advantages of a mobile phone contract deal 

  • ‘Free’ handset – although technically it’s not really free, as you’re paying for it in your monthly fee, a contract deal is a useful method of getting the latest Apple iPhone or Samsung smartphone at a more manageable price. 
  • Hassle-free – you know what you’re getting with a contract. Even if you run over your allowance, you won’t get cut off, as long as you don’t hit your upper credit limit on your tariff. 
  • Build your credit rating – if you pay your bills on time and in full, this could be a good way to build up your credit score. 
  • Free gifts – some providers may offer freebies to sweeten the deal, such as free subscriptions to certain apps, vouchers or discounts on tickets to music or sporting events. 

The disadvantages of a mobile phone contract deal

  • Being shackled – you’re tied to a set mobile network provider, potentially for up to 24 months. This is a long time if reception is poor where you live (even though there’s a requirement for all providers to ensure a certain level of network cover). Also, it’s a long time if you’re itching for a new phone, and although providers will often allow you to upgrade early, they’ll normally charge you for the privilege. 
  • Credit check – you’ll undergo a check on your credit history as the mobile phone provider will want to be sure you can keep up with your payments. If your credit record isn’t so good, a contract deal may not be an option for you. 
  • Exceeding your allowance – while you might not have to worry about running out of minutes, if you do go over your allowance you’ll be hit hard with high charges. 

Is it better to buy a phone on contract or outright?

Whether it’s best to buy a phone on contract or outright completely depends on your personal situation. It’s hard to get a sense of the value involved, because not all phone contract deals split out the cost between what pays for the new handset and what pays for the texts, minutes and data. However, as a general rule, it’s usually cheaper to buy something outright, if you can afford to do so.

Are contract phones more expensive?

A phone contract is a form of credit agreement, which means you could be paying interest on your new smartphone. For the most popular handsets, such as the new Apple iPhone or Samsung models, this interest could make an expensive phone even more so.

When would pay as you go be better?

If you can afford to buy a new phone outright, you might decide to avoid any potential interest and shop around for a SIM-only deal. SIM-only deals also offer a huge variety of packages, which may make it easier to find a deal that’s best tailored to you. 

Alternatively, if you already have a phone that you’re happy with and aren’t tempted to upgrade to a new handset, you could consider simply switching to a pay-as-you-go SIM-only deal and save some money. Pay-as-you-go deals could be useful if you don’t use your phone very often, but if you have a smartphone and plan on accessing the internet on the go, you may find that your top-up doesn’t stretch very far.

How do I compare SIM-only and contract deals?

When making a choice between SIM-only or contract phone deals, the answer lies in how much you need a new phone and what you’re prepared to pay for it. If you’re happy with your handset, a SIM-only option might get you the minutes, texts and amount of data you need. 

If you’re in the market for a sparkly new handset, you can compare mobile phone deals using our mobile comparison service to find the mobile phone deal that suits you. 

If you’re happy with your current phone or you’d rather buy a new handset separately, find a SIM-only deal that suits you from our range of providers. 

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