What are the ins and outs of SIM-only plans? And why would you choose one over another kind of mobile phone deal?
While getting a shiny new phone on contract can be very tempting, a SIM-only plan might be a better option. SIM-only plans are usually cheaper than full-blown mobile contracts and they’re more flexible. We're going to have a look at how SIM-only plans work and discuss some of the pitfalls you should avoid when getting one.
How does a SIM-only plan work?
SIM-only plans only include airtime. You’ll need to get a handset separately. There are two types of SIM-only plans: pay monthly and pay as you go (PAYG).
A pay monthly sim gives you a monthly allowance of calls, texts and data for a fixed price. Most phone networks have a range of different plans, so you can choose the bundle that best suits your usage and your budget.
Pay monthly plans can be fixed (typically for 12 months) or on a 30-day rolling basis, which means the bundle renews automatically every month. 12-month plans are usually cheaper, but you may be penalised if you decide to cancel before the term is up.
Pay as you go (PAYG)
With a pay as you go plan, you top up your credit balance and use it to pay for the calls, texts and data you actually use. Once your credit runs out, you’ll be unable to use your phone to call, text or go online unless you top up again.
Depending on your usage, PAYG can work out much cheaper or a lot more expensive than a pay monthly plan. However, some networks regularly run promotions that allow you to earn free bundles of minutes, texts or data if you top up a certain amount or during a certain period.
Why go SIM-only?
With a SIM-only deal, the cost of your phone and the cost of your airtime are completely separate. This usually works out much cheaper than taking out a contract phone.
SIM-only plans also have other advantages:
They’re more flexible than phone contracts
You don’t have to commit to a 12 or 24-month contract when you buy a SIM-only plan. This is great if you’re unsure of your usage and want to experiment with different plans before committing to a needlessly expensive phone contract.
They’re easier to obtain if you’ve had problems passing a credit check in the past
PAYG and rolling monthly plans don’t usually require a credit check. And while some networks do carry out a credit check when you apply for a 12-month plan, they’re usually more lenient than they are when your plan includes a handset, because their risk is much lower.
In a way, SIM-only plans are a type of borrowing. Your network gives you a bundle of texts, calls and data each month; and you commit to paying for it in full when you receive your monthly bill. By always paying your bill on time, you’ll regularly add positive information to your credit report, which can have a positive effect on your overall score.
Of course, the flipside is that missing payments can have a negative effect on your credit score. If you commit to a 12 month deal, make sure you’ll be able to meet all your payments.
What happens when a 12-month SIM-only plan ends?
When a 12-month plan ends, it usually converts to a 30-day rolling plan. However, you can also renew for a further 12-months, upgrade, switch to PAYG or - if your phone is unlocked - switch network provider.
30-day plans usually renew automatically every month unless you give notice to cancel. If you do give notice, you’ll be switched to PAYG as soon as your plan expires.
What if I want to cancel early?
If you’re on PAYG, you’re free to switch to another network at any time as long as your phone is unlocked. To cancel the SIM, simply stop using it. The network provider will disconnect it automatically after six months.
In the same way, cancelling a 30-day rolling contract is as easy as giving notice and waiting for the term to expire.
The situation is slightly more complicated if you want to cancel a 12-month plan. Different networks have different procedures, so do check beforehand. However, broadly speaking, you’ll need to give advance notice - usually 30 days.
You’ll also have to pay a penalty. As a rule of thumb, you’ll need to pay for what’s left of your term. If you’re two months into a 12-month plan that costs £10 a month, for instance, the penalty would be £100.