When you sign a normal mobile phone contract with your preferred phone network, you are in essence buying two products tied to one. First is the mobile phone set you choose, and the second is the service which includes the bundled monthly calling allowance in minutes and/or texts that goes with it. With that in mind, it's easy to understand SIM Only Contracts. Simply put, this is a type of contract which involves a phone service only. A contract type where the phone network does not give the customer a mobile phone set - the customer only gets the network's SIM card and has the freedom to buy any unlocked mobile phone or simply use any already owned phone set at home.
To the networks, an SIM-only contract is great because it is low risk. They don't have to finance any mobile phone set up front. Every month, the customer uses the contracted service bundle (usually of calling minutes, texts and/or mobile broadband data), and any out of bundle usage is charged and added to the customer's bill for the month. As the networks do not expend large sums of money acquiring expensive mobile phone sets, they profit more, and today's competition means they can afford to pass on their savings to new 3 Network Data Sim only customers, and retain the existing ones.
To the customer, this form of contract presents Freedom, Flexibility and Cost Effectiveness. As a SIM only customer you have the freedom to buy any mobile phone set of your choice even if it's not included in your preferred network's range, or you may choose to save and use your existing phone set. You also don't have to be tied to long term contracts as you have the freedom to terminate your contract anytime - networks generally require only 30 days notice on a monthly rolling plan. Flexibility comes with the ability to bring your existing number with you from other networks, the ability to renegotiate your monthly calling bundle to increase it's value or decrease it, and even the ability to pause your contract if you have to travel or when your circumstance changes. Finally, SIM only contracts are cost effective, because as stated above, the networks invest less on them, make more profits with them, and will pass on their savings to woo new customers and retain the existing ones.
SIM only contracts can also be used to rebuild your credit worthiness or rating. The risk element is low compared to when the networks will have to finance a mobile phone set up-front. Where a customer fails to pay for the service offered during the previous month, the networks may bar use of the service the following month, hence the risk element is mostly limited to the service already rendered. As a result phone networks generally do not apply stringent credit checking measures on customers seeking this type of contracts.However, where a customer with not so good credit rating is consistent with his or her payments on this type of contract, it is very possible that such customer may in months down the line, convert to a fixed term mobile phone contract which will involve being offered a mobile phone set upfront.
SIM only is great for students who may not be financially capable of being committed to expensive long term contracts. This type of contract is also good for those visiting other countries for a few months and who may not fancy getting pay as you go cards, which tariff are much more expensive. It is ideal for those waiting for the release of their desired mobile phone sets - you can get a SIM only contract for a few months and switch to a fixed term contract as soon as your desired phone set is released.
SIM only contract is not limited to private consumers only; if you own your own small business, you can even save more with SIM only contract specially designed for business customers and self-employed people. SIM only contract serves both the mobile phone networks and the customers well - it is indeed a win win situation.