The Dangers of Phone Contracts 1

Melissa is a mother of 2, lives in Utah, and writes for a multitude of sites. She is currently the EIC of HarcourtHealth.com and writes about health, wellness, and business topics.

Although many don’t see it this way, when you buy a new phone via a contract from your service provider, you are effectively taking out a personal loan. The definition of a personal loan is ‘borrowing money to pay back a fixed amount every month’. Does this sound familiar? That’s because your phone contract is a loan against an item of value. But why do the majority of people not see it this way?

As mobile phones become more and more crucial to everyday life the idea of not having one seems like the end of the world, it is for this reason along with the ever-increasing technology behind mobiles that has allowed phone contract usage and pricing to soar over the past 10 years. With this rapid increase in phone contract there has been a lack of information spread over the potential risks that one inherently takes when signing for a phone contract.

Just like taking out a personal loan when you try and take out a phone contract a credit check is taken against your name, this is so they’re sure that you are a reliable payee for the monthly repayment amount. It is also important to note that this monthly fixed fee, isn’t a fixed monthly fee. Looking through the terms and conditions of many providers you will see that they are able to raise the price of a monthly bill at their discretion, no matter how far through a contract you are.

Keeping track of changes in policies and terms and conditions (no matter how dull) are important, so take time to pick the right contact for you and not be dazzled by an array of the latest phones if they aren’t in your price bracket, as if you take out a contract and become unable to pay, your account will default and eventually be cancelled. After this the mobile provider has the right to recover the outstanding amount through third-party debt collection via a county court judgement, think ‘Can’t Pay We’ll Take It Away’, or in the most serious of circumstances, apply for bankruptcy on your behalf.

Although many providers can be very understanding in situations that are out of your control it is an area that no one would like to find themselves in. With this in mind we have some tips below to help keep you out of the red and in the clear.

Ignore the free goodies

This should be a clear warning sign that if someone is offering one thing to sell another, the main object of sale may not be as good as it seems. Even if you want that new Xbox the new pair of Beats by Dr Dre or another subscription to Netflix, the ‘free extra’ coming along with your phone will inevitably leave you paying more than if you bought them both separately on different contracts. Also with many of these subscription based extras they are selling them so that when the contract runs out, the free subscription period will end and you will be automatically enrolled on to a paid plan.

The Dangers of Phone Contracts 2

The phone is never “free”

This might be something that everyone already knows but may need spelling out. The phone is never free. The contract will be split into two parts, one section pays for your monthly usage (data, texts and calls) while the second part covers the cost of the handset. However the cost of the handset in this monthly contract is far greater than the outright price of the phone. It might seem like a great monthly rate but if you’re having to pay that for 24 months, if you do some quick maths you’ll find the figures aren’t so pleasing to the eye.

Upgrade is a nice word and nothing more

Upgrade is normally a great word to hear but if you’re talking about mobile phones all it means is that a company feels that they can keep you as a client by offering you an average deal before you go looking elsewhere. The best way to work around this is to not accept upgrades and instead call to cancel your contract. Ignore the first two offers that they send you and wait until just before you agree to cancel as they will offer you one final deal.

The best deal this month will change next week

Try not to be drawn in by “the best deal this month ends in a week and it won’t happen again after this week!” As due to the competition in the market and the number of mobiles available almost exactly the same, or a very similar deal will be available around the corner. In order to not get sucked in by individual providers and to keep a view of all of them without traipsing around the shops, use one of the many money saving websites available online such as price comparison site Money Pug. These comparison sites collate all the relevant deals on your behalf and in less than 1% of the time it would take you to find the same amount of information.

Bigger doesn’t mean better

A bigger marketing budget isn’t always a better service. In this industry where you don’t need to rely on huge amounts of people power, it enables new companies to enter the market to provide competitive rates and great service. Although you may see the larger providers advertising everywhere, go to your local independent shop and see what they can do for you they are almost always willing to help get you out of an ill-fitting contract and into one that suits better.