In 2019, it has become common to see the price point of a brand-new mobile phone to hit £1000. Apple made the controversial move in August 2018 when they released the iPhone X, but that quickly became the world’s best-selling smartphone. Now a year on, Huawei and Samsung have both released phones that exceed this price point, indicating that mobile phone prices could continue to rise despite a lack of notable improvements. This, combined with the fees of changing provider or upgrading your handset, could be the reason people are holding onto their phones for longer as they are considered a luxury good or huge, interrupting expense. In fact, Samsung reported a 60% drop in year on year profits in Q1 of 2019. Here at Wizzcash, we’re looking at how much consumers spend to keep up with the latest mobile technology trends and why interest could be waning.
The Cost Of Sticking With Your Mobile Phone Provider
EE, O2 and Three customers have all experienced an increase in their bills (2.5 – 2.7%) already in 2019. Phone providers are within their rights to increase the cost during a contract in line with the RPI (Retail Price Index) which is released every month and measures inflation. Providers will need to notify their customers before an increase. With the average monthly cost of a mobile phone already at £45.60, regular increases of 2.5% are no small thing. This could be why consumers are so shocked at their phone bill every month.
Last year, the CMA conducted an investigation into the ‘Loyalty Penalty’, wherein contracts roll over, without being checked by consumers, and subsequently charges a higher rate for the same service. One of the markets that the CMA investigated was the Mobile Phone industry as providers continue to charge the same rate even after the handset had been paid off. The investigation focused on five markets – mobile, broadband, household insurance, mortgages and cash savings – and it is anticipated that £4 billion is being spent in unfair Loyalty Penalties across all five. Citizen’s Advice – who initiated the investigation by the CMA – found that the consumers overpaid by £490 million on mobile phone contracts. What’s more, is that this fee affects 1 in 3 people who own (or pay for) a mobile phone.
Consumers could avoid the loyalty penalty simply by speaking to their provider and actively re-negotiating their contract after they have paid off their handset. Contract lengths will vary, but a standard contract is now 24 months. Alternatively, if you have a working handset after the minimum contract has expired, you could save money by swapping to a sim-only deal. Most of these operate on a monthly rolling contract, and as you are not paying off the cost of the handset, these are much cheaper and are available for as little as £10 per month.
Customers should note that there is a difference between Sim-only deals and pay as you go. Pay as you go can work out more expensive for those who use their phone a lot, specifically their data usage. Pay as you go does not require a credit check whist those looking for Sim-only could be subject to a soft credit check.
The Real Cost Of Mobile Phone Defaults
As the cost of handsets are set to rise, it is expected that the cost of contracts will also increase. As this can also fluctuate due to RPI, some people might miss a mobile phone bill, which means their account will go into arrears. This can lead to the missed payment going to default which could impact your credit file. A missed phone payment could stay on your credit score for up to six years and is one of the most common reasons for mainstream high street lenders to refuse a mortgage. This can lead to consumers no longer being eligible for the best financing options for other services and an ensue of knock on financial ramifications and fees.
Mobile phone providers, like many other companies, will charge penalty fees on overdue payments. These unexpected bills are rarely budget for and could lead some to reach for a short term loan.
How To Avoid Going Over Your Allowance
It is now a requirement for all mobile providers to give their customers an option for limiting the cost of their bill, but only to new customers. If you have been with your provider for more than a year, you might consider investigating this as it is sometimes only available with those who have signed up with a new contract (which could have increased in price per month) with the same provider. The parameters for a bill limit will vary depending on your provider. EE, for example, send their customers a message to warn them that they have used 80% of their allowance. This could help customers manage their usage to limit how much they are using and prevent bill shock. Large unexpected bills could disrupt your finances and make you fall short of reaching your fiscal commitments for a month or so, leading to the need for an emergency loan. If you regularly exceed your data allowance and are regularly spending on one-off boosters, it could be more cost effective to speak to your provider about increasing your allowance.
You can monitor how much of your allowance (data, calls and texts) you have used with apps or by logging into your account online. This could help you regulate your usage and even encourage you to cut down on how much you use your phone. This information is also helpful when it comes to cutting down your bill. If you realise you are not utilising some aspects of your contract, you could be able to re-negotiate for a better deal. Alternatively, you could be more aware of where you can cut costs when you enter a new contract.
Upcoming Mobile Phone Trends
With the upcoming release of technologies such as 5G in 2020, it is expected that data usage will increase a whopping 720% by 2021. Giffgaff reports that in 2019, the average data usage is expected to be 3GB, but after the release of 5G, we could see it jump to 45.12GB. This could suggest that our mobile phone plans – and monthly costs – could start to reflect this massive jump in usage.
New mobile phones are also set to be bigger than ever before, but there seems to be no huge innovation on the horizon for the handsets itself. This could lead to more and more people sticking with their handset – and being overcharged – for the privilege.
Wizzcash can help those who experience mobile phone bill shock to cope with their unexpected fees. If approved, we provide instant loans to those who are in a financial emergency, working to a strict lending criteria. Find out more on our website, today!