Mobile phone contracts or plans are fixed term and range from one month to 24 months (or longer) and have a minimum monthly service charge. The minimum charge usually includes a certain amount of calls. Often these plans also include a handset, but not always so pays to read the fine print.

One of the key benefits of a Postpaid plan is that they tend to have cheaper call rates (when compared to prepay plans).

One thing to consider with a prepaid plan is that costs can easily get out of control so this is very important to understand if you are on a tight budget. One option to look into if you like the idea of a postpaid plan is call capping or mobile cap plans. Most providers now offer capped plans where you nominate the maximum you are able to afford each month.

Also available now are what are called unlimited capped plans. In these cases you are charged a higher monthly fee but this allows unlimited usage. Be careful though as the terms of service of each carrier can very greatly, and while you think you may be getting unlimited ‘everything’ many additional services such as SMS and Data are still charged at a premium.

One down side of the fixed term mobile contracts is that often, if you want to quit the plan early you will have to pay ‘exit fees’ or penalties.

One common mistake that people make when choosing a prepaid plan is that if they overestimate their mobile usage, they don’t use up the included call value each month. On the other side, if they underestimate their usage, they end up paying higher per-minute rates, and may have been better off on a unlimited cap plan or similar. One trick is to get a prepaid plan initially to measure actual usage requirements before selecting a contract plan.

Some things to consider before signing up to a long-term mobile phone plan:

• Think about the length of commitment and minimum total costs involved.
• Find out if a handset/phone is included in the initial cost or if it is an extra fee.
• Understand the costs and penalties involved in paying the plan out early.
• Ask if you can change to a higher, or lower, usage plan at any stage if required.