A little overwhelmed by all your choices on the UK mobile market? You’re not alone. Choosing the right operator and the right kind of plan can be a confusing business. Today we’re talking about one segment of that market: incentive contracts. We’re going to tell you what they are, how they work, and how you can decide whether or not to choose one. So before you start signing contracts, here’s all you need to know about incentive contracts…
What is an Incentive Contract?
Basically, mobile operators offer two kinds of service contracts. The first of these is called a SIM only contract, and it is simply a service contract. You’ll get a calling plan, which will give you a set of monthly limits for the amount of calling minutes, text messages and mobile data that you can use for your set monthly fee, and a SIM card. The second is an incentive contract, which will also give you a calling plan and a SIM card, but in addition you will get a mobile phone. Sometimes these phones are free, but often on high end, expensive phones you’ll have to pay a small down payment.
What are the Advantages of Signing an Incentive Contract?
The main advantage of signing an incentive contract is that you get a phone. If you’re low on cash and can’t afford the up front price of a new mobile phone, then an incentive contract is going to let you walk out of the store with your new phone in your hand. Particularly for high end phones, which retail at well over five hundred pounds, many people find that incentive contracts are the only way that they can get the phone that they want. So if you’re broke, but you need a phone, then an incentive contract might be the way to go.
What are the Disadvantages of Signing an Incentive Contract?
There are disadvantages to signing all contracts. You’re going to be tied into using just one operator for the duration of the contract, for example, meaning that you can’t switch networks to get better deals. But a problem specific to incentive contracts is that you often end up over paying for the phone that you receive. The phone you get isn’t free; instead your monthly phone bill is going to be higher to reflect an added charge, which is an instalment that you’re paying on your new mobile. And often, when you add up all the instalments that you make over the course of a contract, then you find that you end up paying more than the retail price of the phone that you’ve been given.
This is common when you buy products in instalments, since you pay extra for the convenience of not spending too much cash all at one time, and because the company is taking a credit risk by giving you a phone without receiving full payment. One additional disadvantage is that if for some reason you decide to end your mobile contract early you will have to pay a penalty. However, if you sign an incentive contract you will have to pay this penalty plus the remaining balance on the cost of the phone, making the final cost for leaving your contract that much higher.
How Can I Evaluate How Good an Incentive Deal Is?
Some incentive contracts are going to be better deals than others, depending on how much more than retail price you’re going to be paying for your phone. But it’s quite simple to evaluate how good a deal you’re getting with a little math. Find an incentive contract and a SIM only contract with the same operator that both have the same calling plan limits for the amount of minutes, texts and data that you get. The incentive contract will be more expensive, because you’re paying for the phone. Subtract the monthly cost of the SIM only contract from the monthly cost of the incentive contract, giving you the amount of money you’ll be paying each month for the phone, as opposed to the amount you’re paying for service.
Then multiply that amount by the number of months in the incentive contract. If you have to make a down payment on the phone, add this. You now have the total amount that you’re paying for your new mobile. Compare this to the retail price of the phone, and see how close the two numbers are. The closer they are, the better the deal. If you’re within a few pounds, then you’re getting a good deal. If you’re paying more than around fifty pounds extra, it’s not such a great deal and you might want to look at a different operator or a different phone.
3 Phone Deals…
Some operators just offer better prices on incentive contracts than others. In general, 3 phone deals are some of the best on the market. With these you tend to pay relatively close to the actual retail cost of the phone that you get. However, deals with 3 also tend to be quite high end, meaning that they give you an expensive top of the range mobile as well as a large calling plan. For example, the best deal with 3 right now is probably on the Samsung Galaxy S4. This is a brand new, hot release, and the Galaxy S4 has the best features on the market. You get a full five inch Super AMOLED + screen as well as a super-fast octo-core processor. In fact, the S4 might be the best phone on the market right now. With 3 you pay no money down on the Galaxy S4, and then pay just £37 per month.
The service contract included in this has a huge calling plan. You get two thousand calling minutes and five thousand text messages, as well as truly unlimited mobile data. It’s a twenty four month contract, which is fairly standard for incentive contracts. This is a great deal, maybe the best incentive contract on the market. But it’s also a big deal, and might not suit everyone.
Sam Jones‘s friends were all considering a move to 3 phone deals. He looked into it with the help of sites like uSwitch and noticed that they were right about being able to save a lot of money.
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