Smartphones are new source of debt worry
National Debtline reports rise in calls about the impact of expensive mobile phone contracts.
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.
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