Phone contracts explained

24-months? 12 months? No upfront cost? Phone contracts come in many forms. Here’s everything you need to know to help you choose the contract that’s best for you.

What is a phone contract?

A phone contract combines a mobile phone with a set allowance of data, calls and texts, for which you pay a monthly fee.

Some contracts also require you to pay an extra charge upfront to help cover the cost of the phone. This usually ranges from about £50-£150.

Most phone contracts typically run for 12 months or 24 months, at which point you'll have paid off your phone in full. 

Does a phone contract mean your monthly payment is fixed?

Alas, no. Networks are permitted to hike the cost of your contract mid-way through your contract term, as long as the price rise is in line with inflation.

So you may find that your monthly premium goes up a little bit (typically about 50p or so per month) during your contract. Equating to about £6 or so per year.

The good news is that if your provider increases prices at a rate that's higher than inflation, you're within your rights to leave with no financial penalty. 

But you'll need to do so within 30 days of being told of the price increase by your provider.

Under Ofcom rules, networks are legally bound to inform you of a looming price rise (either by text, email or letter). If the network fails to do this, you're free to leave without penalty. 

What are the advantages of a pay monthly phone contract?

  • Pay monthly contracts spread your costs. It’s a lot easier to find £25-£35 per month than it is to find £1,000+ that it costs to buy the latest phones outright.
  • You get better allowances for your money. Phone contracts offer much better value data, calls and texts allowances than pay as you go.

Making sense of the range of mobile phone contracts takes some doing. We'll walk you through the most common types of contract with our at-a-glance guide. 

Phone contracts with no upfront cost

Also known as ‘free-phone’ contracts, these don’t require you to pay anything upfront, with the entire cost of the phone spread over the course of the contract term. 

However, as you'd expect, this usually means you’ll pay a higher monthly charge.

Phone contracts with free gifts

Shop around and you could get a gift card/voucher, headphones, a portable mini-speaker, or even a TV or games console. Free gifts are usually offered on a time-limited basis.

12-month phone contracts

24-month contracts are what most people opt for, but some networks offer 12-month contract terms too.

The chief advantage of a 12-month term is that you’ll pay off your phone contract quicker and you’re not tied in for as long. 

However, as you might expect, if you choose a 12-month contract you’ll generally pay significantly more per month.

Bad credit phone contracts

A bad credit rating doesn’t necessarily mean you can’t get a phone on a monthly contract. Although the major networks carry out credit checks, some are less stringent.

It stands to reason that you’ll have more chance of getting a contract phone if you choose an older, cheaper model, than if you tried for the latest iPhone or Samsung Galaxy S phone.

One way to bypass a credit check is to choose a retailer that specialises in bad credit contracts, such as Sunshine Mobile.

Find out more about getting a phone contract with bad credit in our handy guide. 

Will you need a credit check to get a phone contract?

Phone networks will carry out a credit check when you apply for a phone contract. As you might expect, these aren’t as stringent as credit checks for loans or mortgages.

However, if you’ve missed payments in the past or have CCJs, you may not be accepted.

Conversely, if you’re on the electoral roll at your address, have a good credit rating, steady income and three years of credit history you’ll almost certainly be approved.

Find out more about credit checks for phone contracts with our one-stop guide

Do you need a credit check to get a SIM only contract?

Credit checks for SIM only deals are less rigorous than pay monthly deals.

Some networks, such as giffgaff and ASDA Mobile, allow you to sign up for a SIM only deal without having to pass a credit check.

In general, though, you’ll find that whichever network you apply to join it’s easier to be approved for one-month SIMs than it is for 12-month contracts.

Network contracts comparison

Here we’ll take a look at the main networks’ key selling points for customers who sign up for pay monthly phone contracts.

Three pay monthly contracts

Three offers keenly priced contracts, with well above-average data allowances.

It's also notable for an excellent roaming scheme. Advanced contract customers can use their UK allowances in 71 locations worldwide for no extra charge.

Available on select plans, Go Binge allows you to stream as much Netflix and Apple Music as you like without eating into your data allowance.

O2 pay monthly phone contracts

O2 contracts’ major selling point is that they’re customisable, allowing customers to tailor their monthly allowances to their needs. And choose how much they want to pay upfront.

O2 also stands out for its Priority scheme, which is one of the best customer rewards schemes and offers freebies and priority tickets at O2 venues.

Vodafone pay monthly phone contracts

Vodafone contracts aren’t the cheapest contracts, by any means. But you get a very good service for your money.

Standout incentives include a choice of free subscription streaming service on Entertainment Plans, as well inclusive roaming in 48 or 77 locations (depending on the contract you choose).

EE pay monthly phone contracts

As with Vodafone, EE contracts are competitively priced but still more expensive than the likes of Three. But once again, you get a really premium service for your money.

Smart Plans offer inclusive roaming in 48 locations, while all customers who sign up for a pay monthly phone contract get a free Apple Music subscription.