Computers & Technology

By Salvation Army Financial counsellor Maria Turnbull

Mobile phone contracts explained


Fixed-term ('post-paid') contracts vary in length, generally from one to two years. They usually involve a range of charges, such as connection (flag-fall) and call charges, monthly access fee; device repayment; service disconnection and reconnection charges; variation and termination fees and charges for internet data usage through the mobile phone handset.

This can result in bill shock if you exceed or are not aware of the contracted services. Calls or data up to a certain value may be included as part of the access fee under the contract. When calls or data exceeds that value they are charged at a rate set by your service provider under your contract.

It's important to get the answers to the following questions before choosing a contract:

(1) What is the minimum cost over the period of the contract?

(2) What period of time does the contract cover?

(3) What are the call rates once I exceed the value of the access fee?

(4) Can I change the access fee during the term of the contract?

(5) What are the charges for ending my contract early?

(6) Does the contract include a handset (is it included in the fees and charges)?

(7) How often will I receive a bill?

Variation and termination fees are charges that may be made by the service provider to change the conditions of your contract or to end it early. These fees can be quite high, so before you sign a contract find out what it will cost to change the contract or terminate it early.

A verbal agreement (eg. with a phone sales operator) are as binding as written ones. If you agree verbally to a contract, the conditions of that contract can be enforced as if you had signed it. If you are asked to agree verbally to a mobile phone service contract, make sure you understand the conditions before you do so. You should ask for written confirmation of any verbal agreement.

Try prepaid (contract-free) instead: By prepaying on a monthly or 'pay as you go' basis, you avoid many 'excess' charges. To go prepaid, you need to buy a prepaid-type SIM (subscriber identity module) card from retail store or online. This card allows you to connect your mobile phone to a network and make calls up to the value you have added to your account. You may buy a new 'unlocked' mobile phone or insert the SIM card into your existing mobile phone. In some cases, handsets are sold with a pre-paid service included, but are usually 'network-locked' until you recharge a certain amount or pay an unlocking fee.

If you try pre-paid, investigate: (1) how often you have to recharge your credit, (2) whether your credit or service expires if you don't use it within a certain time (from 1-6 months), and (3) whether the pre-paid call rates beat other options. There are calling-unlimited prepaid SIMs available on every Australian network, as listed at If you want a more flexible service without excess charges, it may work for you to go prepaid.

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