Check your credit score today

See your credit score in minutes. It’s free, forever.

See your score

5 common myths about phone contracts

Can you get a phone contract if you have bad credit? Is the phone really free? We look at 5 common myths about phone contracts


Check your credit score today

See your credit score in minutes. It’s free, forever.

See your score

Is taking out a mobile phone contract actually worth it? Or does the cost outweigh the benefits?

While mobile phone contracts can sound tempting, they’re not necessarily right for everyone.

Sure, you can get a high-end smartphone without paying a single penny upfront. But there are also lots of misconceptions. Which can give you the completely wrong idea of what signing up for a phone contract actually entails.

In this article, we’ll set the record straight about five common mobile phone contract myths, so you can make an informed decision.

Myth 1: The phone is free

Many phone contracts don’t require an upfront payment, which can give you the impression that you’re getting a free phone. Unfortunately, that's not quite true.

The monthly payment on your contract is split into two parts. One part pays for your monthly bundle of calls, texts and data. The other part covers the cost of your phone. In other words, you’re still paying for your phone, only you’re doing it in monthly instalments instead of paying the full price at once.

Of course, this is great if you want the latest phone but cannot afford to fork out £500 (or more) at one go. However, the monthly payments on a contract are usually significantly higher than those on a SIM-only deal.

What’s more, you typically have to commit to a contract for 12 to 24 months. If you do the maths, you’ll usually find that you end up paying a lot more for your phone over the term of the contract than if you had paid the full retail price up front.

Myth 2: You can get a phone upgrade for free

Once again, this is inaccurate. While you can exchange your current phone for a later version or even a different brand altogether, phone upgrades are far from being free.

An upgrade is essentially an extension of your phone contract. In other words, when you upgrade to a new phone, you’ll have to commit to an additional 12 to 24 month contract with your network provider. This means you’ll once again be paying for your new phone in monthly installments; and you’ll usually end up paying a lot more than you would upfront.

Most network providers will offer you the opportunity to upgrade between 30 to 45 days before your current contract expires. While this may sound tempting, you’ll usually need to pay an early upgrade fee. This amount is typically equivalent to the remaining cost of your current contract.

Myth 3: The price of your contract is fixed for the full term

The opposite is actually true.

Most major network providers’ terms and conditions state that they can raise the price of your monthly bill at their discretion, even if you’re halfway through your contract. Indeed, Orange and T-Mobile (now part of EE) and Three) have all done this in the past.

Ofcom, the UK telecommunications regulator, have made it clear that mobile phone operators have every right to do this. However, they do need to follow certain rules.

In particular, your network provider must give you 30 days’ written notice of any price raise. In turn, you have a right to cancel your contract at any time during those 30 days without incurring an early termination penalty.

Myth 4: You can terminate your phone contract at any time

You can usually terminate your mobile phone contract at any point by giving your network provider 30 days’ notice. Which makes this technically true. However, it isn’t necessarily the best idea.

The vast majority of network operators impose an early termination penalty if you cancel your contract midway through. The penalty is usually the equivalent of what you’d have paid had you seen the contract through until the end. When you think about it, this makes cutting your contract short quite pointless, as you’ll still have to pay the same amount.

With that being said, there are two instances in which you can cancel your contract without having to pay a penalty:

  • within 14 days of signing the contract (see below)

  • within 30 days of receiving notice from your provider that your monthly payment will go up

Myth 5: You can’t get a mobile phone contract if you have bad credit

When you get a phone on contract, you’re essentially getting it on credit, because you’re taking it now and paying for it later. For this reason, most network providers will carry out a credit check in order to find out how you’ve handled your debts in the past. This sets their mind at rest that:

  • you can afford the monthly repayments

  • you’ll actually pay your debt on time and see it through to the end of the term

Unfortunately, if you don’t have much of a credit history or you’ve been refused credit in the past, there’s a risk you might be turned down. However, this doesn’t mean you can’t get a mobile phone contract at all.

So whilst you may not be able to get the latest iPhone, you may still be able to get an earlier version or a lower-end handset. Because these phones cost less, it’s not as risky for the network provider to give it to you on contract.

Alternatively, if you think you’re unlikely to be accepted even for a lower end phone, there are network providers on the market - Sunshine Mobile, for instance - that have phone contracts for people with bad credit. Many of these providers do not carry out any credit checks and guarantee you’ll be accepted. The trade-off is that the phones are usually older and the monthly cost is significantly higher.


Andre is a former lawyer turned award-winning finance writer.