Why Are SIM Only Plans Cheaper than Regular Contracts?

If you ever happen to browse to the SIM Only section of your mobile phone service provider’s website, you have probably noticed some prices that are a lot cheaper than what you’re currently paying (unless you’re already on one of these plans). Most people have come to realise the old saying “if it looks too good to be true, it probably is” – is unfortunately very accurate more often than not. However, that isn’t the case with SIM Only, you really can save a lot of money with one of these plans.

Three Main Differences of SIM Only and Standard Contracts

Before abandoning your current mobile phone plan and jumping into a SIM Only deal, you should understand the differences between the two plans. There are really only three major differences, and the majority of them swing in the favour of SIM Only. Knowing these differences plays a major factor in finding the cheapest SIM card only contracts.

First, SIM Only plans don’t provide you with a brand new mobile phone, unlike most 24-month contract plans that will give you a phone of your choice. This is the only disadvantage of SIM Only, but you can still manage to save more than enough money to make back the cost of purchasing a new phone out of pocket – and then some. Just for reference, you can pick up the new iPhone 5s 16GB for just under £600 on Amazon.

Second, standard mobile phone plans only come in 24-month contracts, which keeps your bill from getting too high. If these plans were offered in a 12-month format, you’d be paying off the phone a lot faster and the price would likely increase by over £25 every single month. Since SIM Only negates the new phone variable of mobile phone plans, companies are able to offer monthly agreements with no contract, with the option to agree to a 12-month contract for an even cheaper rate.

Third and final, is the fact that there’s simply a lot more variance between SIM Only plans compared to standard contracts. For instance, T-Mobile offers plans starting at a very basic 250 minutes, 500 messages, and 500MB of data. Whereas, the only options for 24-month contract customers include unlimited texting and data with varying amounts of minutes. Best of all, SIM Only deals still include these unlimited usage deals, but often times at much cheaper rates than 2 year contracts.

Long-term Costs, Benefits, and Savings

I’ll continue to use T-Mobile as an example, because they currently have some of the best deals on the SIM Only market compared to other major UK providers. If you were to look at T-Mobile’s available 24-month contract plans for the iPhone 5s 16GB, you’d see a lot of different prices – but the usage only changes between two different plans across the board. The remaining price changes can all be attributed to a change in down payment, which is directly affected by the cost of the phone.

To make it easy, let’s use the cheapest down payment as an example; which is either £80 with a £48 monthly payment, 500 minutes, and unlimited text and web – or £40 with a £53 monthly payment, 2000 minutes, and unlimited text and web. The total cost of the cheapest down payment plan ends up being £1312 over the course of two years. If you dropped down to the 500 minute plan with an £80 down payment, you’d only save £80 over the course of two years – that’s 36000 minutes for £80.

The above plans are why contract plans are quite sketchy to begin with, there’s a ton of varying prices but usage doesn’t seem to change that much. Factors like this make it difficult to calculate actual price differentials, and often times customers end up paying more than they really need to. SIM Only plans on the other hand, are a lot easier to look at and fully understand.

As mentioned earlier, you can get a brand new iPhone 5s for around £600 on Amazon, keep that in mind when comparing these plans. For a plan offering 1000 minutes, 3GB of data, and unlimited texting, you’d only pay £16 a month with a 12-month SIM Only contract. This is a total cost of £384 if you were to keep the plan for two years (just like you would a regular contract), add a brand new iPhone 5s and you’re looking at £984.

Therefore, by adding a limit of 3GB data usage monthly instead of unlimited, and dropping 1000 minutes, you’ll save a total of £328 over the course of two years. Compare that to the £80 saved by losing 1500 minutes, but keeping the unlimited data, SIM Only easily wins. The fact is, you don’t even get this option with a standard contract, but it could still be a great alternative for a lot of people.