Are you overpaying for your mobile phone?
Some of Britain’s largest mobile phone networks have been recently fined for over-charging customers who reach the end of their contracts. The main culprits being EE and Virgin Mobile.
The problem is that in a typical mobile phone contract, part of the payment is for the “free” handset. But an estimated six million people continue to pay the same monthly payments after reaching the end of the contract period. In effect, they’re paying for the phone many times over!
This news has meant cost-cutting is now at the forefront of many mobile phone users’ minds. A lot of them are used to switching their utilities and broadband but phones often go overlooked. Luckily there are several ways to ensure you aren’t paying more than you need to and I’ll take a look at them in this post.
The big decision: buy the phone outright or lock into a contract?
A lot of people love to get the latest handset available. But you need to work out the true costs.
A 24-month contract obviously spreads the cost into smaller monthly bills – but 9 times of 10, in total they are more expensive overall than if you buy a handset up front and then select the best sim only deal to go alongside it. It’s worth doing the sums.
The cheapest deal on the iPhone XS Max right now will set you back around £65 a month with 20GB of data (there are none with less data). The phone is free. That’s £1560 over two years.
You can buy the iPhone XS Max outright for £1099. And there are SIM only deals with 20GB of data currently at £14 per month. That’s a saving of £125 compared to the contract. And in a lot of cases, you won’t ever need 20GB of data, so the savings can easily be increased by finding a deal with less data.
So make sure you weigh up every contract against buying the phone upfront and getting a sim-only deal alongside it. When you take out a contract you’re effectively loaning the cost of the handset and you can be charged as much as 30 per cent APR.
If you want to be really savvy and save more, just stick with your existing phone or buy a cheaper model that’s 1 year old and get a pre-paid pay as you go plan. Giffgaff are great for this and you can get goody bags from £5 per month.
My tip? Buy outright and go SIM only.
Decided to go with a contract? Make Sure You Log the End date
So are there any scenarios where a contract makes sense? There are a few but it’s rarely on the latest smartphones like the iPhone.
Many retailers do need to shift stock of phones that don’t sell as well or ones they have an excess of. So there are deals available on phones that have been out for a year or more.
With the technology in phones not really advancing that much over the last few years, a device from 2 years ago like the OnePlus 5 easily holds its own against newer models. So, see how the deals on slightly older phones compare, you might be able to come out on top vs going sim only.
The other option is if you’re taking out multiple contracts for your family. This guide from comparison site Tiger Mobiles provides a lot of info on the best family mobile phone plans available right now and BT Mobile seems to have the best offering with 20% off for every additional contract. These plans aren’t without drawbacks though so again make sure you run the number vs. buying a separate sim only or pre-paid pay as you go deals.
Finally, if you do go for a contract, remember to log the end date and switch plans as soon as it ends so you don’t fall into the overpaying trap.
Other ways you can get stung: your provider can up the cost during the contract
Customers should also watch out for annual price rises during their contract. Many mobile phone networks do increase the cost of the plans in line with inflation.
For example, in February last year Vodafone, EE and O2 announced mid-contract price hikes of 2.5pc. This was after the Office for National Statistics announced a similar rise in the retail price index.
Raise some cash by selling your phone while the model’s still in demand
If you do want a new phone, then there are other ways you can make a bit of money and that’s by selling it. Avoid phone recycling websites as they give you way under the market value, instead sell it privately on eBay and depending on the model you can recoup quite a bit of money to put towards buying a new one outright.
Photo by Rahul Chakraborty on Unsplash
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