How to get a cheaper mobile phone contract

Britain’s largest mobile phone networks have been condemned for cynically over-charging customers who reach the end of their contracts.

The contract period is linked to the payment for the "free" handset. But an estimated six million people continue to pay the same, high monthly payments after reaching the end of the contract period - effectively paying twice for their phone.

 Culprits include phone giants EE, Vodafone and Three.

The iPhone X, the latest iteration of one of the world’s most popular smartphones, is due to be released next month with a reported price tag of £1,000.

The iPhone 8 appeared last month.

This means cost-cutting is likely to be forefront in the minds of many mobile phone users. Many will be tempted by contract deals which spread the cost. An iPhone 8 is available on contracts for around £50 to £60 per month, example.

Luckily there are several ways to ensure you aren’t paying more than you need to.

Most users are likely to have significant “waste” in their contract packages: voicecall minutes, texts and data that are never fully used.

While more contracts these days come with unlimited minutes and texts there are still potential savings to be found and pitfalls to be avoided.

Below are some of the best deals available by cutting out the waste.

The big decision: pay cash upfront, or lock into a contract?

Many of us love having the latest handset available.

But you need to weigh up the costs. Contract arrangements spread the cost into smaller monthly bills - but in total they are likely to work out more costly overall than if you buy a handset for cash and then select the best, no-contract deal.

It's worth doing the sums.

For someone who uses a good deal of data each month the new iPhone 8 will set you back around £40 a month, depending on the contract.

O2 can offer a 24-month deal with unlimited minutes and texts and 3GB of data costing £38.35 a month (£27 a month plus a £270 upfront charge). If you want to up the data, Vodafone can offer a comparable contract but with 4GB of data for just a little bit more each month over the two years: £40.25, including an upfront charge.

The Samsung Galaxy S8 works out cheaper than the iPhone. A 24-month EE contract with unlimited minutes and texts and 2GB of data will set you back £29.24 a month, including an upfront charge.

For only a little more each month, EE will offer an identical contract but with 5GB of data - this will cost £34.24 a month over two years, again taking into account the up front charge.

Weigh this up against buying the phone upfront and getting a sim-only deal alongside it. This will often work out far cheaper. When you take out a contract you're effectively loaning the cost of the handset and you can be charged as much as 30pc APR.

The iPhone 8 costs £699 upfront while the Samsung Galaxy S8 will set you back £689. The cheapest sim-only contract thrown up by Billmonitor, the comparison site, is with Tesco Mobile and costs £7.50 a month, and comes with just 500 minutes, 5000 texts and 1GB of data.

This makes the total cost of an iPhone 8 with O2's contract £966 over two years, while buying the handset and going sim-only will only cost £879. A saving of almost £100.

In contrast, the 24-month contract with EE for the Samsung actually represents a saving on buying the handset upfront, costing £701.76 over two years, compared to £869 using the sim-only method.

Going with a contract? Log the end date

Today’s bombshell news, uncovered by Citizens Advice, revealed many continue paying for a handset long after they’ve already cleared the cost.

Avoid this by keeping your old phone, if it’s still functional, and reverting to the sim-only method described above. Sim-only contracts are usually 12 months and cheaper than a contract including a handset.

In addition to the Tesco Mobile offer above, other providers offer good deals with more data. 

Taking out a sim-only deal can mean saving hundreds over the course of a year. For £9 a month, Three will give you unlimited minutes and texts and 4GB of data. Both of these are 12-month contracts.

Sneaky sting: your provider can up the cost during the contract

Mobile phone customers should also watch out for annual price rises on renewal and even during their contract. Many mobile phone networks now raise the cost of the plans in line with inflation.

For example, in February Vodafone, EE and O2 announced mid-contract price hikes of 2.5pc. This was after the Office for National Statistics announced a similar rise in the retail price index, a measure of inflation linked to the cost of goods.

If your mobile phone provider does this they will have to let you know and it’s worth using a comparison site to check your options.

Cash-raising tip: sell your phone while the model's still in demand

There are other ways you can make a bit of money when upgrading your phone. Phone recycling websites are common and can help you meet the cost of an upgrade.

Comparison sites Compare and Recycle, Sell My Mobile and Compare My Mobile will find you the companies offering the most for your phone. An old iPhone 6 can still fetch up to £200.

View latest offers from Vodafone

Compare sim-only deals