Free contracts - how do they work?

happy2bhere

Excuse my ignorance, need a new mobile and came across loads of free monthly rental deals. I'm aware that you probably sign up for an agreed monthly fee and that you claim back the money at intervals during the contract. So, heres my question, how do they make any money? I just don't get it! Theres gotta be a catch somewhere and i wanna know what it is before i sign anything!!!

Advance thanks!!!

debbie42

I think they make their money from the sign up fees, but am not sure. I've used these for a few years now, successfully apart from one firm that went bust half way through. They have more than paid for the hassle of sending back bills etc.

You MUST be organised regarding sending in claims or you may end up paying the full price.

peterstannard

Presumably they make interest from your money and also there will be people who don't/forget to claim their cashback who end up paying over the odds.

happy2bhere

These were my first thoughts, but then taking into account the free calls and texts you get, how do they make a profit?!!

Mobile_Mole

Dealers are paid commission by the network operators for each new connection. This commission is then used to fund cashback payments.

Network operators still profit as you are paying them your monthly line rental for the minimum term of the contract. The cashback arrangement with the dealer has nothing to do with the network operator.

That's a very brief summary. If anyone would like to read the detailed guide I have written please PM me.