Probably the most popular way customers purchase phones in the UK is via a mobile phone contract. These are often called Pay Monthly Contracts, Mobile Phone Plans or Contract Deals. They all basically mean the same thing. You get a new phone (like an iPhone 6, LG G3 or Samsung Galaxy) and a monthly minutes, texts and internet data allowance from a phone network (like EE, BT Mobile, O2, Three or TalkTalk).
You pay the network a set amount of money every month for the duration of the contract. The cost of buying the handset is spread out across the contract term and you're not going to run out of credit and need to top up your phone. Any minutes, texts or internet data you do use outside of your allowance would be added to your next monthly bill.
Coverage: the signal, speed and reliability of your mobile network is important if you want to keep in touch with friends and family using your mobile. If you're going to use the internet on your phone they you should consider what the 3G and 4G coverage is like for each network in your area. Technology has come a long way since the 1990s when you had to stand on a chair in the corner of the kitchen in order to make a phone call, but that's not to say that all networks now have perfect signals across all of the UK.
Usage: thinking about what you will be using your phone for will help you decide what kind of plan is right for you. If you're a heavy internet user, watch YouTube videos on your phone and upload tonnes of photos to social media platforms then you'll probably want a few gigabytes of data on your monthly allowance. If you call your friends and family every day then you might want a mobile phone tariff with a couple of thousand minutes. If you're just a relatively light user and just browse the web a little and make a few phone calls and texts then a smaller internet, calls and texts plans might be perfect and save you a few quid
Phone: mobile phones come in all different shapes and sizes these days so you need to pick one that you think you'll be happy with for the contract term. You might want to consider what size, colour, weight and manufacturer you choose as well as specifications of the camera, memory storage, screen and 4G capabilities. At the very least you're likely to want to know that the phone is reliable and has a fairly decent battery life.
Contract length and upgrading: are you a phone-fashionista? Will you want to change your phone in the next year or so? Mobile contracts are, more often than not, set over a 24 month period. If the flexibility of changing handsets, upgrading or completely changing networks is important to you then think twice before signing up to a long term contract. Many networks now offer fairly decent upgrade deals during your contract term, but do check the small print carefully before committing.
Cost: it'll often work out cheaper to get a mobile phone and a tariff (minutes, texts and data allowance) as part of a contract. However, this isn't always the case. Sometimes it is cheaper to buy a handset outright and pay for a SIM only deal (where you just get a SIM card to pay for the minutes, texts and data allowance).
There are some mobile phone deals with an iPad, Xbox, laptop and a whole array of other gifts. These are fantastic if you're looking for a way to get a the latest electronics without forking out hundreds of pounds up front.
You can check out tonnes of gift deals here. When a phone contract comes with a gift it invariably means that the phone contract costs more than it otherwise would (without a gift).
Compare phones with gifts versus the same phone deal without a gift to see if you could buy the gift with the difference!
Other types of freebies added on to mobile phone contracts are entertainment packages like Spotify, Sky Sports Mobile TV and Now TV. Entertainment services can be included on some networks' plans and offer great value if you like to stream music, movies and sports on your phone.
Cashback is an amount of money that a mobile phone retailer gives you in return for signing up to a mobile phone contract. A customer signs up to a mobile phone deal and the retailer will give the customer money, often by way of a cheque.
There are 2 types of cashback. Redemption cashback is when a customer has to claim the cashback in instalments over a set period of time.
The values are often quite large, but you need to read the small print very carefully and check timings for what you need to do and when. The second form of cashback is automatic cashback, where the mobile phone retailer will give customers a stated amount of cash back without the customer needing to claim.
The discount (or cashback) you receive here is often much smaller than the manual redemption cashback.
Networks can offer different contract lengths, ranging from 24 months right down to 30 day periods. Most phone contracts are over 24 months, but you might find that some networks offer 18 month, 12 month and even shorter terms. Even a 30 day SIM-only plan is still technically a month-long contract.
Whichever contract length you opt for, try to keep in mind the effective annual cost of your plan.
Dropping down to a 12 month term might appeal to you if you don't want to feel tied-in, but can you afford the relatively higher monthly cost that comes with the shorter term?
It's also planning what you'll do once your contract expires: staying on the same monthly cost means you're effectively paying the same rate as if you were buying the handset all over again, so check the latest mobile deals when you're contract is about to expire.
Different networks have different policies on cancellations, so check your network's terms and conditions first. If you're out of the contract term and are considering changing your mobile phone deal, then you can compare the best mobile deals here.
Switching to a new mobile deal is often very simple; you need a PAC code from your existing network supplier in order to take your mobile number with you to a new network.
Most mobile phone networks charge extra for making international calls, however, there are ways that you can ensure you're saving as much as possible on any international calls you make.
Check the networks' different policies and tariff plans as there could be one that's perfect for you. Also consider using web calling services like Skype, FaceTime and Viber to make international calls through your internet connection, as this can often be a much cheaper way to contact family and friends abroad.
A capped mobile contract means there's a set usage allowance that you can not go over. For example, you spend £10 a month for a maximum of 1,000 minutes of call-time.
Capped contracts can be useful for parents who want to give children their first phone. They're also pretty good mobile phone contracts for students. Some capped contracts even come with a safety buffer, meaning that there's a small amount of 'emergency' credit left on the phone in case you run out an need to make that all important phone call.
As well as capped contracts, some mobile phone companies offer contracts that can be shared across members of the same household. These are often called Shared Plans and give customers a set minutes, texts and data allowance to be used by any family member on the plan.