Prepaid Cellphones vs Contract Cellphones

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When you decide between buying a new cellphone in cash or on a contract, there are a lot more other factors to consider than the cellphone’s price. But, because the price of a good smartphone is in the thousands the first thing we all consider is whether we have the cash available to buy prepaid cellphone cash and own it outright, or if getting it on a contract cellphone will make better financial sense.

agreement blur business close up
Signing a contract. Photo by Pixabay on Pexels.com

There are advantages and disadvantages to buying prepaid cellphones and contract cellphones. We elaborate further below.

Contract vs Prepaid cellphones

The biggest differences when buying prepaid and contract cell phones are:

1. Upfront costs.

To get a prepaid phone you will have to make all the payments before you can enjoy using it. But if you get it on a contract you can use it while making low monthly payments toward its cost.

2. Inclusive value, discounts, and extras.

To sweeten their contract deals cellphone shops often throw in discounts, give you extra once-off data, or other benefits as part of the contract. When cellphone contracts give you data and minutes monthly in a bundle equal to the value of your price plan it is called inclusive value. With prepaid cell phones, though, there are no added benefits or any monthly bundles.

3. Flexibility to make changes.

You will find that your flexibility is very much restricted within a contract. Changing your network, downgrading your contract, terminating your contract early, or changing your cell phone are all expensive exercises in a long-term cellphone contract. A cellphone bought and paid for has fewer restrictions when making changes within a network operator.

4. Older model smartphones are cash-only.

If you weren’t able to afford the old Samsung Galaxy S20 when it came out but you still want it, it will be difficult to find it on a cellphone contract. But, you can still get a brand new Samsung Galaxy S20 on sites like takealot. These older models are sometimes also available refurbished.

The advantages of a contract cellphone

The reasons why people often choose to buy a cellphone on contract are:

1. The monthly costs are more manageable.

Instead of paying a hefty upfront cost for a flagship smartphone from Samsung, you can pay the phone off monthly over 2 or 3 years, making the costs more manageable.

2. Inclusive value bundles work out cheaper.

Your cellphone contract will often be bundled with voice and data, and the overall value of the bundle works out cheaper per month than when buying its 30-day prepaid equivalent.

3. You almost always get discounts and benefits when you upgrade.

One of the biggest benefits customers can get lately includes free data when they sign up or upgrade. Customers who have been on a contract with a service provider often get a heavy device discount. We’ve upgraded twice and are now paying R20 per month for a R5,000 cellphone.

Advantages of buying a prepaid cellphone

Buying a cellphone cash owning it outright, and not being on a cellphone contract has many advantages, like:

1. The flexibility of not being in a long-term contract.

For some it is important to be flexible and not be in a long-term contract. You are flexible to move your number between network service providers without any major expenses. You can spend as little or as much as you want on data and minutes.

2. You can buy a refurbished or older model cellphone.

Saving on the costs of owning a cellphone is probably the major drawcard here, meaning you can bargain shop and move even further than someone on a contract can.

3. Your dual-SIM cellphone is network unlocked.

All dual-SIM cellphones that are bought on a network operator’s contract are network locked. Meaning you cannot use a SIM card from a different network operator to take advantage of lower rates for a long time.

How do cellphone contracts work?

A cellphone contract is a long-term contract you sign with a service provider where you receive a cellphone with bundled value, and you pay a monthly installment for it.

When you apply for a cellphone contract you apply for credit with a financial services provider. Therefore you will go through a credit application process that will determine whether you qualify for credit and how much credit you qualify for.

Unboxing of a new Samsung Galaxy A33 5G. Image source: twitter.com\jackypeter3

How to qualify for a contract phone

The cellphone you qualify for may be directly proportional to the credit you qualify for. It is mainly determined by:

  • Your monthly salary or income
  • Your credit score
  • Your disposable income
  • The service provider’s verification and approval processes

How to apply for a contract cellphone online

Have all your documents ready in a soft copy by scanning them and keeping them in a PDF file format. The process to apply for a cellphone online is similar to this:

  • Select your desired phone
  • Choose a suitable price plan, keeping in mind your monthly budget
  • Select the number of months to pay off the cell phone. This is usually 24 or 36 months
  • Accept the terms and conditions of the application and terms of use
  • Upload your documents. This includes your proof of banking, proof of residence, proof of income, and ID/Passport
  • If your paperwork is in order and you qualify you will be notified within one working day
  • Take delivery of your new cellphone. Delivery is usually free, depending on the price of the cellphone and your location

MTN contract cellphones

MTN is very competitive with their cellphone contracts, as seen with the current promotion where they give out a free 10GB anytime data bundle for a new contract or upgrade.

Their cheapest contract cellphone is currently the Samsung Galaxy A03 Core on the MyMTN MegaFlex R65 for R129 monthly over 24 months. It gives you R65 airtime as part of the contract.

The cheapest contract cellphone on the September Y’Ello trader. Screenshot source: mtn.co.za

Vodacom contract cellphones

Vodacom’s contract cellphones that are available online start at R99 per month for 24 months on the RED Flexi 130 Top Up. Currently, the cheapest Vodacom contract phone is the Mobicel Neo LTE 8GB for R99pm x24.

A screenshot of the cheapest Vodacom contract cellphone, the Mobicel Neo LTE 8GB for R99pm x24. Screenshot source: vodacom.co.za

The Vodacom RED Flexi 130 Top Up price plan gives you R130 worth of airtime within the contract.

Vodacom’s contracts for cellphones are the RED contracts.

They can be categorized as:

  • Red Flexi – It is called flexible because it allows you to top up your airtime as standard. You get airtime loaded to your cellphone number’s credit monthly, which you can add to if you need to.
  • RED Core – Useful for managing the monthly spending on voice minutes and data. It does not allow for Top Up unless the Red Top Up plan is selected.
  • RED VIP – It features loads of monthly minutes which are capped at over 9000 per month

Cell C contract cellphones

The number of Cell C’s contract phones might be limited, but they are quite competitive. The offers for their Pinnacle packages are focused on data, offering 1GB on the Pinnacle 1GB TopUp price plan. Included in this price plan is a monthly provision of 30 anytime network minutes, 30 minutes Cell-C to Cell-C minutes, plus 500 SMSes.

An example of a Pinnacle 1GB TopUp contract from Cell C. Screenshot source: cellc.co.za

Telkom contract cellphones

The third largest network operator in South Africa, Telkom, has the FlexON price plan. Get a Telkom contract phone on the Telkom FlexON price plan for entry-level cell phones.

We found the Samsung Galaxy A13 for R229 monthly for 24 months on the FlexON2 price plan. This price plan gets you the contract phone plus 2GB of data, 75 minutes to call any network, and 500 SMSes. Included are 500 minutes to call other Telkom lines. An extra bonus for this contract is a once-off 20GB of data.

The Samsung Galaxy A13 for R229 monthly over 24 months on the Telkom FlexON2 price plan. Screenshot source: telkom.co.za

FNB Connect contract cellphones

FNB Connect may be a newcomer, but the strides it made make sure to keep MVNOs on their toes. FNB Connect’s contract cellphones were sold as device-only. FNB Connect then started to bundle the contract with the network’s own inclusive data and minutes.

The least expensive FNB Connect cellphone contract is the Xiaomi Redmi 9A, bundled with the XS Top Up price plan. The price plan includes a monthly provision of 30 anytime network minutes, 200MB of data, and 30 SMSes. This contract is currently priced at R149 monthly over 24 months.

The FNB Connect cellphone contract for the Xiaomi Redmi 9A has a monthly payment of R149. Screenshot source: fnb.co.za

Lay-by a phone

Flagship smartphones like the Apple iPhone are really expensive, starting from around R10,000 for an Apple iPhone SE 2022 edition. A smart way to work around the heavy upfront costs is to buy a prepaid phone on lay-by.

A lay-by facility is a payment method that splits the whole amount into manageable payments, which you then pay over an agreed number of months or weeks until the whole amount is paid. The store will then give you the phone on your final payment. These payments are usually equally split into 4 months.

Lay-by an iPhone 15 at TFG

If you can delay the gratification of getting your phone immediately after you order it you can wait for 4 months and lay-by an iPhone 15 at a TFG store.

The fashion retailer allows its customers to use their TFG account to buy a cellphone online, but any other customer is able to lay-by a phone at any of their stores.

A cellphone stand in the Foschini store
A cellphone stand in the Foschini store. Northern Cape, August 2022.

Where can you buy the cheapest phones in South Africa?

Perhaps the best stores you can buy cellphones cash in South Africa are the shops known for low prices: Ackermans and PEP.

Ackermans cellphones

Ackermans cellphones are sold under the budget fashion retailer’s tech brand called Ackermans Connect.

Ackermans sells affordable cellphones like Huawei, Itel, Knoia, Mobicel, and Premio. You can buy a cheap cellphone at Ackermans because they are marketed at the lower end of the budget, with most of them priced at under R2,500.

PEP cellphones

Cellphones at PEP stores can be bought on contract or bought in cash and owned outright.

With PEPcell having partnered with Vodacom we found we could buy a Samsung Galaxy A03 Core contract cellphone for R125 per month on the Red Flexi 125 price plan.

PEPCell cheap smartphones come in under R3,000, which is affordable for most people who are looking for a cellphone that can use basic functions like WhatsApp.

Screenshot: PEPCell cheap smartphones under R3,000. Source: pepstores.com
Screenshot: PEPCell cheap smartphones under R3,000. Source: pepstores.com

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