UP TO four million people are paying over the odds for their mobile phone because of a lack of transparency on charges, according to reports from Citizens Advice and Ofcom, the communications industry watchdog.
Most people buy a handset with a mobile-phone contract that bundles the price of the handset with the cost of calls, texts and data. But customers are often unaware that in many cases they continue paying for the phone after their contract has ended and they own the handset.
Citizens Advice analysed more than 700 different bundled contracts and found that it would be cheaper to buy a phone outright in three out of four cases. On average, customers were overcharged £22 a month, but it could be as much as £38 a month for top of the range phones such as an iPhone 7 or Samsung Galaxy.
Gillian Guy, chief executive of Citizens Advice, said: “It is unacceptable that mobile providers are knowingly overcharging customers for phones they already own.”
Citizens Advice is calling on providers to make charges more transparent by separating out the price of the phone from the cost of the usage.
The call for transparency is echoed by Ofcom, which has also criticised bundles that effectively double-charge customers for a handset.
Lindsey Fussell, Ofcom consumer group director, said: “Mobile customers should get the best possible deal. We’re concerned that people are not told, or cannot tell, exactly what they are paying for.”
Ofcom is considering regulation to oblige mobile-phone companies to break down the different costs of the contract. It is also consulting on plans to require mobile companies to alert customers when they are coming to the end of their contract.
Christine Torlay, mobiles expert at price-comparison site uSwitch.com, said: “Mobile phones are different from energy bills and mortgages because there is usually no bill shock at the end of the plan, so customers are often unaware that the contract has ended. But just because the monthly cost of your mobile doesn’t go up, doesn’t mean you are getting a good deal.”
Some providers offer flexible tariffs, where the price drops when you have paid for your handset. But experts are cautious.
“The intention behind these deals to prevent consumers from paying twice for the same handset is commendable, but they are certainly not the best value deals available, even within the same network,” said Ms Torley. “The concern with these ‘flexi’ tariffs is that providers charge a premium for these deals - up to 38% extra - meaning that consumers could end up paying £231 million more than they should on the airtime part of the deal alone.”
If you do not want a new phone at the end of your contract, you can often save money by switching to a SIM-only deal.
They are cheaper because they do not include the handset and they are usually either 30-day or 12-month plans so are also nmore flexible than the standard two-year bundled contracts.
“New phones can be very pricey, but in many cases it can work out cheaper to buy the handset outright and pair it with a SIM-only contract,” said Ms Torlay. “Whilst this may not be possible for everyone, it’s worth considering as you could end up paying considerably less, when compared to a traditional contract.”
Customers who want a new handset can also opt for a SIM-only deal, but they would then have to pay the full price of the handset upfront. If that is not possible, then a bundled contract is usually the best option.
Whether you choose a SIM-only or bundled contract, you need to think about your phone usage because both types of deal come with an allowance of calls, texts and data. You might also want to take into account roaming charges if you plan to use your phone abroad.
“There are many deals out there which seem great value for money, but leave you with the smallest of data allowances,” Ms Torlay said. “This is often a false economy, because if you use more data than what is included in your package, your bill will sky rocket and the cheap deal you originally took out is no longer looking quite so economical.”
There is no need to feel tied to your current provider. You might also get a cheaper deal from some of the smaller companies, such as ID mobile and GiffGaff, especially if you are looking for a SIM-only deal.
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