How do lock-in contracts work?
When you buy a new phone you have two options: buy the phone outright either new or second-hand, or buy one through a network provider with a phone plan attached (for example, through Telstra, Optus or Vodafone). If you buy through a network provider you’ll typically get a discount on the price of the phone, but you’ll also need to sign up to a lock-in phone plan for 12 to 24 months.
Sometimes, those telcos will physically lock your phone to their network, so you can’t switch the SIM to another plan until your contract is up. At that point, you’ll need to unlock your phone to be able to change providers.
What does ‘no lock-in contract’ mean?
A ‘no lock-in contract’ is the opposite; you’re not tied to any particular telco and can switch plans whenever you like by buying a new SIM and activating the plan online. It’s the cheapest way to operate your phone because you can compare plans and switch to the one that has the best deal as often as you like – even every month, if you like!
Vodafone was the first to ditch lock-in contracts in 2017. Telstra followed suit in 2019 with a massive overhaul of the structure of its phone plans and electronic products. Today, all plan providers offer plans with no contracts, which you gives you more flexibility to choose a plan that suits you.
Types of no lock-in contracts
Here are some of the types of plans with no contract:
- Month-to-month SIM Only plans
These plans can be either prepaid (pay before you use the service) or postpaid (pay for what you use after expiry). You are free to change plans after the month is up without any penalties. Here are some month-to-month SIM only plans available in Australia.
Examples of month-to-month and other types of plans being compared on Whatphone.com. Source: Whatphone
- Prepaid SIM Only plans
‘Prepaid’ means the plan was paid for upfront and avoids extra fees and charges. These plans are usually monthly, which could be 28 or 30 days. You can compare some prepaid sim plans here.
- Long expiry prepaid plans.
Long expiry plans are prepaid plans that last longer than one month. They’re a way to save more money because you’re essentially buying your plan ‘in bulk’, which can give you up to 32% savings. Long expiry prepaid plans can last anywhere from 3 to 18 months.
Final words: What are the benefits of no lock-in contracts?
Contract-free plans open up a world of flexibility and savings. Just make sure to compare plans and choose the amount of data you’ll use each month (without paying for data you don’t need).
Choosing between a contract and no contract
It’s possible a lock-in contract might come with more features and extras to make the offer look more appealing. It might even be a better deal than you can get on a flexible plan – but remember, you’re locked in for up to two years, and phone plans are getting more competitive, not less.
That means a lock-in contract could become less valuable over time. And, the amount of data you need might change, but you’re stuck without being able to increase or decrease the amount you’re paying for until the contract expires.
You’ll need to weigh up whether a lock-in contract is right for you. It might be that the only way to buy a new phone is to do it with a phone and plan through one of the network providers because you’ll get a discount on the phone cost.