There has been something of a movement in recent months towards a sim-free phone as being the best way of buying your mobile phone, but it is not always cheaper.

The Three Ways

Way 1 – Monthly Contract

You pay a reduced price for the phone you choose and pay a monthly amount for every month of your two year contract. This monthly payment includes a payment towards the cost of the hand set.

Way 2 – Pay as You Go (PAYG)

You sign up with a network for a two year period, but make no commitment to spending a set amount each month. You pay full price for your chosen phone from your supplier, even though it is locked to your network

Way 3 – Sim Free

You buy your phone from a discount retailer and pay slightly less than full price. You then pay for a call, text and data bundle from your chosen network, the network supplies you with a sim card and you stick it into your phone. You can either top up your sim card on a PAYG basis or you can sign up for a monthly call/text/data package.

But Which Way?

A Pay as You Go contract makes no sense whatsoever. You pay full price for the phone and you are locked into the one network for two years.

The decision comes down to Sim-Free or a Monthly Contract.

If you cannot find the cash then a monthly contract is your only option and it is then just a matter of choosing the deal and network that suits you best,

If you cannot pass a credit check for a monthly contract then the sim-free phone becomes your only option, you might also have to pay for usage on a PAYG basis.

Most people will have a choice between sim-free and a monthly contract.

Doing the Calculations

Sim Free

Phone cost - £390.50 from (Oct 2012)

Air Time cost - £12.90 per month (Three Oct 2012) for 200 minutes, 5000 texts and ‘unlimited’ data

Total cost over two years - £12.90 * 24 plus £390.50 = £700.20

Monthly Contract

Phone cost - £0

Air Time cost - £29 per month for 24 months (Three Oct 2012) for 2,000 minutes, 5,000 texts and ‘unlimited’ data

Total cost over two years - £29 * 24 = £696

In this example (and every time I have made the comparison) the monthly contract works out cheaper and it includes a lot more talk-time, in this example 1800 extra included minutes. I have ignored the interest that you would gain by keeping the cost of the phone in a bank account.

When Would Sim-Free Work Out Best?

If you are travelling a lot and would be using the phone abroad then going sim-free means you can just buy a local sim card and a PAYG deal to use while you are away. This avoids any roaming charges. Even to access the Internet via a foreign network is going to cost you dearly in data roaming charges.

When Would Contract Work Out Best

This is the best deal for most people, even if they go abroad occasionally. Two thousand minutes is substantially more than two hundred included minutes per month, roughly 70 minutes every day rather than 7.

Most people say that you need at least 2Gb of data per month, which is why I have chosen these two plans to compare. There are cheaper plans, but they only come with 250Mb of data per month. There are limitations and ‘unlimited’ is not really unlimited at all because there are always ‘fair use’ limitations hidden away in the small print.

If you do travel a lot then you can always buy a mifi personal mobile wireless device and plug a local network sim card into that to eliminate roaming charges.

In Conclusion

Sim free mobile phones are not a wonder-solution for most people, in fact they usually work out more expensive than a contract phone.