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Smartphones are new source of debt worry

ReenaSewraz
by Lovemoney Staff ReenaSewraz on 22 April 2012  |  Comments 11 comments

National Debtline reports rise in calls about the impact of expensive mobile phone contracts.

Smartphones are new source of debt worry

More bad news I'm afraid, mobile phones are yet another thing landing us in masses of debt. Figures revealed today from the charity National Debtline show an increase in the number of calls from people with costly phone contracts they're unable to honour.  

Calls to the charity about telephone debts have increased 150% since 2007. Last year alone, the debt advice helpline took a massive 14,651 calls from consumers struggling with their contract payments.

But what has caused this dramatic change and what can we do to avoid yet another debt trap? 

Smartphones: the game changer

The charity pin-pointed expensive smartphone contracts as a potential cause of the problem.

Yes, smartphones have transformed the way many of us live and communicate, but the revolution has also come at a cost. Lengthy contracts and costly monthly bills mean the allure of an all singing all dancing headset comes at a price many are unable to afford.

Joanna Elson OBE, Chief Executive of the Money Advice Trust, commented: “Smartphones have had a massive impact on society in the last few years, but one often overlooked consequence is that we’re all paying far more for mobile phone contracts than we were five years ago. This in turn means more people struggling to meet phone contract payments, and finding themselves with a debt problem.” 

Contracts

Smartphones bought on Pay-as-You-Go can set you back up to £500, so the appeal of a contract that spreads the cost over a number of months is clear. It's typical of the ‘buy now pay later’ culture we have become accustomed to and which has caused us so much trouble.

The problem is that the monthly payment on these contracts is ballooning with some iPhone 4s deals asking for £41 a month - that’s £984 over the course of a 24-month contract. This cost doesn’t even account for what you may end up paying if you exceed your allowances or use your phone abroad.

As with many contracts, if you find you need to cancel, phone companies will most likely ask you to pay out the remainder of the contract, doing little to ease your financial situation.

An option that many are turning to is rolling contracts. This alternative differs to Pay as You Go as you are given allowances and do not have to top up. Although it involves footing the cost for the handset it means you can get the benefits of calls/texts and the internet for a fixed price and the option to cancel after every month.

Yet some phone companies are not even giving consumers a choice; limiting some new models to contract only and not offering a Pay as You Go option.

Compare tariffs and phones

If you’re regularly exceeding your allowances it may be worth changing your tariff and shop for a better deal. Take a look at our take on the best deals here.

The booming market in smartphones means there is a lot of competition and contracts available to suit you and what you can afford. It can sometimes be a bit baffling so comparison sites are a good way to determine which provider is being the most competitive. Remember smaller networks can offer good deals too.

It is also worth researching which smartphone is right for you. It is easy to get swept away by the marketing campaigns for the iPhone but there a range of other models that are just as good and cheaper.

Help

So what can you do if you find you can’t afford the current contract on your smartphone?

Fortunately there are organisations like National Debtline and the Consumer Credit Counselling Service which are charities dedicated to offering free advice and can help you budget and identify whether you are paying too much for your phone contract.

There are also numerous websites to visit with tools to help you get a hold of your finances like www.mymoneysteps.org or our very own MoneyTrack budgeting tool.

Sim-only tariffs: how I saved £234 on my mobile bill

Avoid this mobile phone bill shock

The Full Monty from T-Mobile - phone tariff that gives you unlimited texts, calls and data

How-to Guides » Set a budget and stick to it

How do I get out of debt?

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Comments (11)

  • fenemore
    Love rating 202
    fenemore said

    The answer is simple - don't have one!

    Is there anything a smartphone is capable of that you cannot live without? I seriously doubt it!

    Report on 21 April 2012  |  Love thisLove  3 loves
  • Kulu
    Love rating 3
    Kulu said

    What's new? This is little to do with "smartphones" and a lot to do with people wanting things that they cannot afford.

    Simple rule: If you can't afford it, don't buy it.

    Report on 21 April 2012  |  Love thisLove  2 loves
  • CuNNaXXa
    Love rating 362
    CuNNaXXa said

    ...Or, if you are going to sign up for a long term contract, make sure that it is affordable.

    Some people will sign up just to get the latest offering from Apple. It is not about the need to have a smartphone, or indeed just a phone, it is about owning an Apple, and bragging to your mates that you own an Apple.

    My boss, who can afford such luxuries, has actually said that next time he gets a new phone, it will probably be a Samsung, or HTC, or Nokia, as he is not impressed by his iPhone 4s. Apple are selling phones that are desirable simply because they have the Apple logo.

    Lets be honest, these days there is very little between the various smartphone makers, regardless whether it is a Windows Phone, an iPhone, or an Android Phone. They all make calls, and have the ability to download apps, some of which are useful, while the majority are simply memory fillers.

    On my own phone, I use the phone, and I use the satellite navigation coupled with Googles Find utility. This is brilliant because I could be anywhere in the UK, and it will locate whatever I wish to find. Looking for a Fish and Chip shop? Just enter 'Fish and Chips' and it will display, starting with the nearest, all the local chippies within a radius of your own location.

    Not that a phone satnav will ever be able to replace a dedicated device, but you go everywhere with your phone. Who carries around a Tomtom or Garmin all the time?

    Oh, and when I am bored, I can play Sudoku...

    Report on 21 April 2012  |  Love thisLove  0 loves
  • Offa
    Love rating 40
    Offa said

    What a load of pill**ks out there. What on earth are they talking to each other about ? From my hearing of them on the public transport it could do without being said. Read a book instead on the history of being ripped off by having the latest gizmo that you do not need.

    I have a mobile phone , a clam type one a PAYG tariff which I use now and again. Perhaps £15 a year if they are lucky. If I need to communicate I have a BT land line on an anytime tariff , and pay rent once a years, which I need for the internet anyway.

    Keep your money in your wallet/bank account and do not buy teh latest 'must -have'.

    Report on 21 April 2012  |  Love thisLove  1 love
  • snowchick
    Love rating 11
    snowchick said

    I really really don't get these people. I have colleagues who have a new mobile phone every year 'as part of the contract' - 'for free' - they do not seem to understand they are paying for it by paying on contract. It appears that a picture of a half eaten apple on your phone will set you back about £300 more than a phone without.

    My mates pay about £35 a month. I pay about £20 a year - no not a typo - £20 A YEAR. I have a nice slidey phone with a camera and a slide out keyboard (Samsung GT-B3310) It is perfect for my needs. I do not need the internet on it (although it is there if I need it) - I have that at home. If I want a chat I use my home phone which is cheaper by far. If I use my mobile it is usually for a "I am at the shops I have seen a whatever - shall I buy it?" Or "I will be late home" type call. I do have a major advantage in that I have 5 free texts a day which dates back 13 years when my provider (who I will not mention in case they realise it is a mistake and remove it) were offering 5 free texts a day for ever as long as your phone remains in credit. It has remained in credit - same number same provider - same PAYG plan. I rarely use all five texts a day and I top up £20 every January at the airport on my way to my annual skiing holiday.

    I did actually treat myself to a HTC wildfire in Jan 2011. I never had the need to use it outside the house. I use it to chat with my mates from my sofa and play games at 3am from my bed if I can't sleep - (If I didn't have the phone I would use the pc). I don't need it - it is a luxury - a toy. I got it as a PAYG and could not get on with its idea of predictive text. It doesn't like place names, friends names, slang, and half the times invents a word I have never heard of in the place of one I actually typed. It also needs charging every day whereas the samsung will go up to a week without needing to be charged.

    Thank you Keep your contracts and your flash phones. I will keep my Samsung and remain in credit.

    Beat That Batman!

    Report on 21 April 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 643
    electricblue said

    @Offa

    Obviously, unlike you there are people out there with friends and family they want to keep in touch with. Your comment has nothing whatsoever to do with smart phones and their costs.

    Report on 21 April 2012  |  Love thisLove  0 loves
  • RMN05
    Love rating 11
    RMN05 said

    I'm definitely in the offa & snowchick camp. I agree with everything they say. People are so "must have" these days, and to hell with the money consequences. Much mobile talk doesn't need saying, but if these users really think it so essential then the mobile industry will take the money. They'll charge what they think the market will tolerate for as long as users play their game. That's business. But they ain't having my money. I really don't need to be in touch with the world and his dog when I'm away from the house. What needs to be said can wait till I'm back with the landline. But thankfully I pre-date the must have, pay later culture, so max £20 a year is what the mobile companies get out of me. Self control has a lot to be said for it.

    Report on 22 April 2012  |  Love thisLove  1 love
  • buywhenhigh
    Love rating 54
    buywhenhigh said

    You can dumb down school grades and Uni degrees for a thicker generation, but you cant dumb down debt. Hence the increasing problems so many numpties have with it.

    Report on 22 April 2012  |  Love thisLove  0 loves
  • mjammy78
    Love rating 1
    mjammy78 said

    Totally agree with above commenters

    what happened to looking at your own budget before taking out a contract???

    I also think that greed and a lack of self control is a major factor...

    Report on 22 April 2012  |  Love thisLove  1 love
  • electricblue
    Love rating 643
    electricblue said

    Then again you have to laugh at someone who thinks they are remarkably frugal and yet have a BT land line package. If they had any friends they might have learned about cheaper options.....

    Report on 22 April 2012  |  Love thisLove  0 loves
  • ScottyMP
    Love rating 0
    ScottyMP said

    I wanted a smart phone and didn't want the hassle of expensive contracts. I stayed with my provider and upgraded to a smart phone - but avoided all the fruit based brands. I took out a new ACER model and am paying less per month than I was with my original non smart phone.

    As long as we continue to pay these over priced rates and contracts the providers will continue to charge us... we're quick to moan about petrol and other fuel costs... but is a mobile that much of a necessity to put you in debt?

    Go for a cheaper rate - and plough your savings in to a fancy holiday (or just put it towards your petrol and food costs)

    Report on 23 April 2012  |  Love thisLove  0 loves

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