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Pay-as-you-go vs pay monthly

Which SIM is best for your needs?

Once you’ve chosen the best mobile network for you, you’ve then got two broad choices: pay a monthly bill as part of a contract, or pre-pay for your data and call time, topping up if and when you run out.

There are upsides and downsides to each of these options, and which appeals will likely depend on you and your needs. So, we run through the pros and cons of PAYG and pay monthly deals, to help you come to a decision about which is best for you.

The pros and cons of pay-as-you-go

There’s no contract with a mobile provider in a pay-as-you-go arrangement. You pay upfront for credit on your account, and use that for your data or voice calling needs. It’s the perfect solution for those who simply don’t use a lot of data or make many calls.

The main advantage of a PAYG setup is flexibility. You can change carriers and alter the size of the data bundles, which is handy for when you travel, times where you’ll be mainly using Wi-Fi or whatever other arrangements you may have.

Pay-as-you-go makes it easy to control the amount you spend on data and voice calls each month, since you can’t spend more than you have. As such, it’s also a good option for parents providing a SIM card to a child, for example, where you want to ensure they don’t rack up large bills.

However, the per-minute or per-megabyte cost of pay-as-you-go may be higher than contract rates. You’re also unlikely to benefit from any added extras, which providers sometimes include with monthly contracts as a way to sweeten the deal. With pay-as-you-go, what you see is usually what you get.

Finally, it’s possible to run out of credit on your phone at inconvenient times, so some additional effort is needed to keep tabs on your account balance.

READ NEXT: Best pay as you go SIM deals

The pros and cons of monthly payments

With a monthly contract, you pay a fee at the end of the month and, in many cases, there’s no limit to how much data you use or the number of calls you make – unless you choose to cap it. Monthly contracts may take the form of just a SIM-only plan, or they may include a handset.

The pay monthly option is likely to best suit those who make a lot of calls or use a lot of data, use a phone for business purposes or want an easier way to get their hands on the latest handset. It will be cheaper than pay-as-you-go, since the per-minute or per-megabyte rates are generally lower, plus you won’t need to worry about keeping your account topped up – you’re simply billed automatically at the end of the month.

professional woman at desk using phone - pay as you go vs pay monthly

Monthly contracts may also come with perks, bundled services or other enticements to make you sign on the dotted line. For some people, these can outweigh the potential negatives.

The biggest drawback of a monthly contract is that you’re locked in for a certain length of time, something like 12-24 months. If you want to change providers, or end your contract prematurely, you will face penalties and have to settle outstanding balances – on your handset, for example – all at once. Many mobile network providers will also include mid-contract price rises, usually each April in line with either the Retail or Consumer Price Index. Remember to factor this in when determining affordability.

If you’re not careful, you also run the risk of running over your included voice or data allocations on the contract, so you may end up with a bigger bill than expected at the end of the month.

Note that a poor credit rating is also likely to mean that you fail to get approval for a contract, as a credit check is a requirement.

READ NEXT: Best SIM only deals

The allure of subsidised handsets

One of the key reasons you may be attracted to a monthly contract is the possibility of a subsidised handset. You can get the latest and greatest phones without having to pay out hundreds of pounds upfront. However, this is simultaneously a tactic to lock you into long contracts that may not be in your best financial interest over the long term.

We asked Liz Hunter, commercial director at, if she had any advice for readers who feel that the prospect of a contract handset was too good to pass up:

“Consider opting for a refurbished phone instead. These phones are pre-owned devices that have been restored to work (and look) like new, often with a warranty for peace of mind. Even better? They’re miles cheaper than buying a new phone outright, or paying for one as part of a monthly contract.

Pair this phone with a SIM-only rolling pay-monthly contract. This gives you the predictability of a monthly bill with the flexibility to switch providers easily. It’s a win-win – you get a great phone at a lower cost, reduce waste and have more control over your plan.”

woman on sofa in domestic setting looking and smiling at her phone - pay as you go vs pay monthly

We agree that this is a great option, and it’s also worth keeping in mind that there’s nothing wrong with keeping your last contract handset, opting not to renew your contract and converting to pay-as-you-go. You won’t lose your number, and the process generally takes 30 days.

Modern smartphones, especially if you have a higher-end model, will be perfectly usable far beyond a contract cycle. It’s becoming more common for handsets to receive updates and software support for six years.

There’s no wrong option

Read any contract carefully before you sign and, in principle, there’s nothing wrong with opting for a monthly contract. Similarly, pay-as-you-go is just as valid a choice. As long as you understand what you’re getting into, there are advantages to both options.

What’s perhaps a much bigger and more impactful decision is the mobile provider and the specific deal you choose. To that end, check out our guide to the best pay-as-you-go deals, which we’ve compiled having spoken to more than 4,000 mobile customers. If a contract seems more up your alley, then the best mobile contract deals will ensure you don’t miss out on the best deals currently available.

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