24-month contracts are a terrible choice for customers - the argument runs.
It leaves them locked into a network for longer than they want and at the mercy of potentially poor reception & poor customer service for 2 years. People have mortgages that last for less time!
A lot of people cannot predict what will happen to their lives and mobile phone usage in 3 months - let alone 24. What if the contracts no longer suits them?
Worst of all, very few 24-month contracts allow a handset upgrade mid-contract, meaning that, already by the end of the first year, most customers’ handsets are woefully out-of-date and, in some cases, in pretty poor shape as regards battery life and general wear & tear.
Here’s uSwitch’s advice on the matter:
“Try to avoid signing a 24 month contract, even if it means that your chosen contract phone will be free - it will be another two years before you qualify for an upgrade or can switch provider.”
Ok - I’ll be honest. This is a “demi-myth”. There’s no way anyone could argue wholeheartedly in favour of 24-month contracts and a lot of the above criticisms are true - to an extent (see below).
There’s just one inconvenient fact: when it comes to cost, they’re often the only rational choice. Comparing 18 to 24 month contracts at the same tariff allowance levels shows there is usually at least £5/month difference (sometimes up to £10) - meaning that by opting for an 18-month contract, you’re choosing to pay at least £90 more over the length of the contract.
In addition, 24-month contracts simultaneously minimise the upfront costs to customers who choose more expensive handsets. Although in general it’s almost always economically rational to pay as much as possible upfront, 24-month contracts do limit this one-off payment.
billmonitor can easily be accused of playing the “rational economic” argument here and ignoring other salient factors but I’ll try to explain the reasoning. Let’s take each criticism in turn, beginning with the most salient.
Problem 1: Can’t predict what will happen in 24 months
Validity: Naturally no-one can. billmonitor forecasts how you will likely use your phone, within safe margins of error - but of course life changes. However, getting a larger contract actually makes it easier to handle larger life changes and leave a safety margin. By choosing a longer contract term, you can pay less for the same amount (or often more) minutes, texts and data, leaving plenty of “savings” to cope with future usage changes.
What you can do: Contrary to received wisdom: The longer your contract term - the more financial flexibility you can build in for the the unpredictable events in life, which might change how you use your phone.
Problem 2: Can’t upgrade to latest handset when you like - and handsets don’t last 2 years
Validity: Is it worth paying an additional £90 (or indeed up to £180) over the course of your contract in order to be able to get a new handset half a year earlier? Only the individual can answer - billmonitor doesn’t think so. How likely is the handset to die before the contract term is up? Well - this depends on many factors, mainly due to individual usage and how well you take care of your phone. In general, it should be possible, nay likely, that it will last the full term - barring major damage or loss (which are not relevant to this argument).
What you can do: Critically assess whether getting access to the latest handset 6 months sooner is worth paying £90-£180 more. Should be a simple cost-benefit analysis for anyone.
Problem 3: Can’t escape if network reception is poor
Validity: In many ways, a very valid concern. There is little recourse to change anything due to poor reception once in contract (unless the device is at fault). If you live in a dead reception area, you may be stuck for 24 months. Equally, if you move home during those 2 years, there’s no guarantee at all reception will be as good as where you used to live.
What you can do: Check reception quality via friends in your area and make sure you at least glance over the operator’s network coverage maps (even though they may be overly generous, they will quickly give you a rule of thumb). The best advice on how to avoid the “no reception” trap I’ve seen, is via Ken Lo here. You can always use the 7-day “cooling off” period, if you bought online or remotely - so test your phone and test it early!
Problem 4: Can’t escape if customer service is poor
Validity: Can be very valid - especially as there is little chance to test customer service early on during a contract. However, I don’t believe this is a valid reason not to sign up for 24 months - there is a lot of online info to help re: best network for customer service either via customer reviews or other public data (see last week’s post on networks with most/fewest complaints). In the end, it’s only 6 more months until you can change and I doubt customer service is the major influencing choice for many.
What you can do: . Good service is often rewarded and bad service punished on the web - use it as a valuable resource. Otherwise, I’m afraid, short of registering complaints with the network and consumer responsibility groups like Ofcom or Consumer Direct - there’s little that can be donw except grin abd bear it!
Some important notes
- billmonitor is not “pro” 24-month contracts - indeed our advice is generally to keep your current phone and go SIM-only, giving you much more freedom to move, if necessary and access to the largest possible savings. Customers should specify whichever cotnract length they’re comfortable with, while being aware of the real costs and savings available.
- Should 24 months be best value? The ideal is that every customer has maximum flexibility at all times, of course. However, in reality, handsets are expensive these days and customers are reluctant to pay too much upfront (although it’s almost always the most financially sound advice). 24 months is a compromise between lower monthly and upfront costs and a longer guaranteed income for operators. Both sides technically win - though in practice, customer resentment runs especially high. The answer may lie in avoiding our addiction to the always getting new phones - especially where they add little value…
- 12-month contracts are incomparable, in terms of value to 24-month ones - so are not part of this discussion. Choosing 12-months is a conscious choice of convenience over cost - everyone is free to make their own choice.
Do you agree?
It’s not the mainstream line to be in favour of 24-month contracts - in many ways a very unpopular product. Do you agree that they are better value and therefore grudgingly the best choice. Or do you choose 12-, 18-month contracts (or even PAYG) out of protest or for one of the reasons given above? I’d love to hear your thoughts! Comment below.…