New research from Citizens Advice has found that some major mobile phone providers continue to charge customers for their handset even after it’s already been paid for.
The analysis found that unless customers of EE, Three and Vodafone change their plan once the fixed deal ends, they continue to pay an average of £22 extra per month.
Customers buying new mobile phones often take out contracts with the cost of the new handset included in the overall price of the fixed term deal – the majority of which are paid off on a monthly basis over a period of two years.
But EE, Three and Vodafone do not automatically remove the cost of the handset from billing once the fixed term is up – so if you don’t switch plans or providers, you’re at risk of overpaying.
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Buying an iPhone 8? Don’t be loyal
The analysis found that owners of premium smartphones are likely to be stung the most. Owners of phones such as the iPhone 7 (128GB and 256GB) Galaxy S8 and Sony Xperia XZ Premium pay as much as £38 extra per month on average.
When Citizens Advice explored the potential loyalty penalty for owners of the iPhone 8, they found that customers with a 256GB model could find themselves being charged an additional £46 after their fixed-term deal ends.
But even if you own a handset costing less than £300, you could still continue paying an extra £19 per month. The table below shows the average monthly penalty for consumers staying in the same contract after their fixed-deal ends.
Citizens Advice called for providers to reduce the cost of mobile phone bills once the fixed-term has ended, so as to reflect the cost of the handset being paid off. They also asked providers to make billing clearer for consumers by separating the cost of the handset from other services (such as data and minutes), arguing that this would make contracts both clearer and easier to compare.
How to avoid the loyalty penalty
Citizens Advice found that 36% of customers with a fixed-term contract that includes the cost of their handset continued in the same contract after the fixed-term ended and 19% were still on the same contract six months later – this could mean overpaying as much as £228 if you have a premium smartphone.
If you’re on – or about to take out – a contract that includes the cost of your handset, make sure you’re aware of the end-date and primed to switch. Another option is to buy a handset outright initially and get a 12-month, or a monthly Sim-only deal – often this is a more affordable option overall. If buying a handset outright seems like too big an investment, consider investigating other ways to spread the cost – such as a credit card with 0% interest.
Sim-only deals allow you to change your plan much more easily, ensuring you’re always getting the best value for money. And there are more providers offering Sim-only deals, opening up your options. Find out more using our guide on how to choose the best mobile phone deal.