How to save money on your next phone contract
Britain’s mobile phone networks have been widely criticised for over-charging customers who reach the end of their contracts, not offering loyal customers a discount despite the fact they have paid off the expensive phone part of their contract.
People generally spread the cost of a new phone over 12, 24, or even 36 months, but once they have paid off the device, phone companies tend not to automatically reduce their monthly fee and keep charging them the same amount – effectively paying twice for their own phone.
So, the most effective way to save money on your phone bill is to make sure you change deals the day your 24 month contract is up, but what about when you are buying a new phone?
Most people do not use up all their minutes, texts, and data, but you do want to give yourself some breathing room in your contract, as most phone networks charge hefty fees for going over your limits.
Take a look at what your current usage is, and expect that in the future your usage will be similar, or even slightly more in terms of data as we all stream music and video more regularly. My general rule is to give yourself about 20-25% breathing room on top of your normal usage to make sure you don’t get hit by overage charges.
Pay cash upfront or lock into a contract
In general, phone companies tend not to subsidise new phones too much and you end up paying about the same whether you purchase your new phone outright upfront and then buy a sim-only (SIMO) contract or whether you lock yourself into a 24-month contract with the phone included.
However, the best sim-only deals will lock you into a 12-month contract anyway, so if you’re searching for the best mobile phone deals and tariffs then the easiest option is probably to get the phone and contract together. This way if something goes wrong, you only have one company to deal with and they should be able to fix your issue – there’s no being bounced between the likes of Apple and Vodafone with each blaming each other for the lack of connectivity.
Should I get insurance?
A top-end mobile phone today can cost upwards of £500 (or £1000 if you want an iPhone X), so buying a replacement if you break or lose yours can be a very expensive exercise. Insurance can help protect you from such a large outlay by charging you £5-10 per month, and a number of premium bank accounts (including student accounts) come with such insurance included. However, if you take an average of £7.50 per month this would be add up to £180 over the life of your contract – which could get you a budget smartphone like the Moto G5.
You need to decide whether you want to be safe in the knowledge you will be able to get a new or like-for-like replacement phone for a few pounds per month in insurance, or whether you would be happy to see out the remainder your contract with a budget smartphone should anything happen to yours.
What about second-hand phones?
Second-hand phones can be a great way to save money, but do be aware that often while they may have been very well looked after, batteries do not last forever and slowly degrade over time. If you are buying a second-hand phone, always add the price of a replacement battery into the price – luckily Apple has recently dropped the cost of replacing iPhone batteries, but each manufacturer will vary.
Personally, I would only really look at second-hand phones as a replacement option if I have no insurance and wanted a higher specified device – but again I would expect to buy a replacement battery on top of the cost of the phone.
Photograph by Hurk