All You Need To Know About Phone Contracts

How incredible are mobile phones today? The latest devices have top-quality cameras, amazing battery life, large storage and mind-blowing features. Of course, this also means they're becoming more costly.

Mobile phones are a huge expense when purchased upfront. That's why most people take out phone contracts instead.

But how do phone contracts work, and are they cheaper in the long run?

In this guide, you'll find out everything you've ever wondered about opening a contract for your phone.

How do phone contracts work?

A phone contract allows you to pay off your mobile of choice over 24 or 36 months, with added data, SMS or voice bundles.

Take the latest iPhone, for example. If you were to buy it once-off, it would cost between R23,699 and R29,999. But if you took out a contract with — let's say, MTN — you would pay roughly R1,419 per month for 24 months. You'll also get 4GB of data and 50 minutes talk time every 30 days.

Phone contracts work because they allow consumers to pay off large amounts in small increments, and make more money for the providers in the long run. It's a win-win, really.

Taking out a phone contract VS buying it once off

Better cash-flow

Think about it. The smaller the monthly amount, the less it'll hurt your bank account. Since most people get paid monthly, it's easier to budget for that timeframe, as well.

Better credit score

It pays to prove you pay. Whether it's a gym contract, internet package or store account, paying your debt on time shows you're responsible enough to live with credit. And, without a good credit score, it's hard to apply for the important stuff like home loans or mortgages. Phone contracts prove you're trustworthy and help set you up for life. So if you've ever asked yourself, “are phone contracts good for credit?”, the answer is yes.  

Contract upgrades

When your contract comes to a natural end, you're due for an upgrade. If you're a valued subscriber already, you're better off than those opening up a new contract from scratch. Firstly, you can choose to keep your existing phone (which would only be 2-years-old) and just up your data or talk time. Or secondly, you can switch to a better deal with ease, since the provider would already have all your details.

Do phone contracts accept bad credit?

When building your credit score, phone contracts are a good place to start. Every network provider is different, but often you don't need a top-of-the-range credit score to open up small-fee account. Small-fee accounts include most basic phone contracts, TV streaming subscriptions, or store accounts.

Are phone contracts cheaper?

Actually, they're not. For the consumer, phone contracts end up costing more in the long-run.

Let's take the same iPhone deal listed above and do the math. The phone is R23,699 upfront, but paying R1,419 each month will accumulate to R34,056 in total — around R10,000 more than you'd pay once-off.

But for that additional R10,000 you’d pay each month, you get added data, talk time or texts thrown in each month. So really, it’s about what’s more convenient for you.

How do I open up a contract?

To open a contract, approach a service provider of your choice, select your deal, and provide them with details, like:

• your ID number.
• proof of address.
• a three-month bank statement or recent paycheck(s), to prove you can afford the deal.
• your bank details (to set up a debit order).
• Plus, additional provider-specific requirements.

Can you switch phone contracts?

Most providers allow you to upgrade before your contract is up, but there are often waiting periods or admin fees involved. Contact your provider and find out all the details before you make the switch.

If you want to switch between service providers, this is tricky and not recommended. You'd need to terminate your current contract early, pay the early termination fee and the outstanding amount owed, and then sign up with a new service provider. If you can help it, it's always recommended to see out your current contract first.

What are the best phone contracts?

With so many deals around, you may find yourself wondering “what phone contract do I need?”

The answer lies in who you are as a mobile phone user. The best contracts for avid social media users, gamers, or music streamers are the ones with data offerings of 2-8GB — whilst the older generation opts more for better airtime and talk-time deals.

Which phone contracts are easy to get?

Most phone contracts are easy to get, provided you have all the necessary documents and have done your research. Luckily, we've helped you get a leg up on the process.

We also have great deals made simple, at Mobile Store.

‍