Having a phone is essential, but how many of us actually know the details of the tariff we’re on? We look at where the hidden costs lie and whether or not you should insure your mobile.
- Pay-as-you-go or pay monthly?
- Mobile phone contracts
- Comparing phone tariffs
- Phone cost cutting tips
- Should you insure your phone?
Pay-as-you-go or pay monthly?
With mobile phones you either pay for exactly what you use in minutes, texts and data – pay-as-you-go – or a set fee that includes a range of services – pay monthly.
The best option for you depends on how much you use your phone and what you use it for. On a pay-as-you-go tariff, you pay for every call, text or chunk of data you use. If you rarely use your phone, this is probably the cheaper option.
However, if you use your phone more regularly, it may work out cheaper to pay a monthly fee, which includes a certain number of call minutes, texts and data.
Mobile phone contracts
Pay monthly tariffs don’t have to be taken out under a contract, but many are because they include the cost of the actual phone.
When you take out a contract, you’re signing a legal document agreeing to pay a set monthly fee for a certain period of time. Be aware that this contract will be enforced, even if you lose or break the phone.
Comparing phone tariffs
The amount you pay for your phone services is worked out using a tariff system. This gives a set price to each different service you use, eg 25p per text, 30p a minute for calls and 35p per megabyte of data.
Pay-as-you-go users will pay this for every service they use while pay monthly customers will only pay the tariff system charges if they go over their monthly allowance.
Make sure you compare tariffs when choosing a phone, and if you use a particular service (such as texts) more than others, look for the best deal on this service.
Phone cost cutting tips
- If you pay monthly, try to stick to the services that are included – it can be expensive to go over.
- Picture texts, sound and video files are usually not included in your text allowances and will be charged as extra.
- Using your phone abroad can be very expensive – limit using it on holiday
- Be careful of data charges – downloading videos, or using websites that constantly update can use a large amount of data and send you over your allowance.
- Watch out for ‘bolt-ons’ - packages you can add to your pay-as-you-go and pay monthly bill which offer extra calls, texts or data for a fixed cost.
Should you insure your phone?
This is a question that many people have about their phones, and it generally comes down to three things:
- The value of your phone (if you own it outright)
- The contract repayments if you have a mobile contract
- The inconvenience of replacing a lost or damaged phone
If you’d find it difficult to find the money or time to either replace your phone or continue paying a contract, then you could consider buying insurance.
Mobile phone insurance doesn’t have to be taken out with your phone provider - many third party insurers can provide cheaper protection. Cover can sometimes be provided with your bank account, so it’s worth finding this out before buying your own.
As with all insurance, check exactly what your phone is covered for before signing up for it.
This article is provided by the Money Advice Service.
