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O2 launches 'custom' plans - but it'll cost you

O2 now offers 'custom' tariffs which allow customers to choose how and when they pay for a device – but you could save £100s/yr by shopping around.

The mobile giant's new plans promise customised deals, designed to better suit a consumer's budget and needs.

On choosing a new mobile handset, O2's calculator allows you to set the length of your contract, how much you want to pay upfront and how much data you need. It will then work out how much you'll need to pay each month.

Though the new plans appear to be a step in the right direction, from the deals MoneySavingExpert has seen, you can save almost £500 on the overall cost by opting for a traditional two-year contract elsewhere – and it's still with O2.

See our cheap mobile tips guide for ways to slash your mobile costs.

How does it work?

O2's mobile handsets are still split into two parts: a device plan, which covers the cost of your handset, and an airtime plan with your allowance of minutes, texts and data.

The new custom plan lets you decide how much you want to pay upfront for your new mobile handset and the length of time over which you want to pay it back – from 3 to 36 months.

You can then choose your data allowance on top of the standard unlimited minutes and texts – from 1GB to 50GB. This runs on a rolling contract for at least the duration of the device plan, though you can change your airtime plan each month.

The overall cost doesn't change, but the amount you pay can be determined by you. O2 has said you can pay off your device plan without penalty at any point, meaning you could also escape your airtime plan.

Save £100s/yr by going elsewhere

Though O2 allows you to build your own bespoke deal, it still works out as an expensive option.

A 64GB iPhone X with unlimited minutes, texts and 15GB of data on O2's custom plan costs £1,710 over 24 months, whereas our current top pick deal via reseller mobiles.co.uk, still with O2, works out at £1,201 – a massive saving of £500 over the two years.

Similarly, a Samsung Galaxy S9 with 4GB of data, unlimited minutes and texts costs £1,133 with O2 over two years, which compares to £642 in total with our current top pick deal on Vodafone.

Even if you don't want to sign up to a 24-month contract, for greater flexibility you're still better off buying a handset outright and pairing it with a cheap Sim deal, many of which are on one-month contracts.

There are also other interest free ways to spread the cost of a handset, such as iPhone payments. Purchasing a 64GB iPhone 8 this way would cost £31.50/mth over 20 months. Pairing it with a cheap Sim with 1.5GB data and unlimited minutes and texts from Plusnet at £6/mth would cost £750 in total. For the same 20-month period, and a slightly lesser 1GB allowance, going direct to O2 would set you back £1,088.

See our cheap mobile tips guide for more information, including the cheapest ways to get a handset, and our Best Sim onlyCheap iPhone and Cheap Samsung guides for more ways to save. All of the above prices are subject to annual Retail Prices Index (RPI) increases.

What does O2 say?

O2 chief executive Mark Evans said: "Our custom plans put power back in the hands of the consumers who don't want to be tied down by rigid contracts, especially at a time when certainty and transparency are at a premium in today's economic environment. 

"Businesses have a responsibility in these turbulent times to do what is right by their customers. The mobile industry does not have the best track record on transparent, flexible billing so we are laying down a challenge to the industry to follow our lead."