Billshock!

Bill shock - the shock of receiving a massive and unexpected bill - is becoming increasingly common with mobiles phones, leading in many cases to severe financial hardship and even bankruptcy.

Here we look at some ways you can avoid big blowouts. Various financial counselling services have reported that mobile phone bills are the number one cause of people - especially young people - seeking bankruptcy guidance.

It seems that many people simply don’t understand how their mobile plans work, what their phones can do, and how much certain services cost. Ignorance is no longer bliss, if indeed it ever was. It’s also no excuse for phone companies, who expect to be paid no matter how bewildered you might feel.

So how can bill-shock be avoided? The two most vital things you can do are to know the products, and to be honest with yourself. Here are some general tips:

PREPAID IS ALWAYS THE SAFEST
With pre-pay, what you pay for is what you get, making it very easy to control your expenditure each month. This is an excellent option for people who aren’t sure where they’ll be in the future, and those with a bad credit rating. Even if your prepay credit is used up, you can still call emergency numbers.

CHOOSE YOUR CAP CAREFULLY
If you’re on a Cap plan, make sure it is big enough, and be careful not to exceed your limit. Cap plans are great value so long as you stay within your cap. However, call rates on Cap plans are truly terrible, and costs can really add up if you use up your available credit.

BE CAREFUL WITH SMS
SMS may seem cheap - only 20- 25c per text - but they can really add up. Many young people send hundreds of SMS per month, significantly adding to monthly costs. Premium SMS services - including reality show voting - generally cost at least twice the normal SMS rate, and usually aren’t included under cap limits.

UNDERSTAND YOUR PLAN
Different carriers calculate things in different ways, and are not above deliberately confusing customers with complicated terminology and details, as various cases before the ACCC attest. For a fun exercise, try a direct comparison between an Optus and a 3 Mobile bill. There is a huge proliferation of choice in the mobile phone market, but choice is only a good thing when you understand all the options. Otherwise, it becomes disempowering, leading to confusion, frustration and potential hardship.

OWN YOUR PHONE OUTRIGHT
You can buy a functional handset for under $60. Owning a mobile outright is always safer than paying one off on a 24-month contract. Depending on the carrier, the cost of paying out the handset if you break your contract might be bigger than you realise.

BE CAREFUL WITH YOUR HANDSET FEATURES
Phone companies aim to make spending money effortless. They provide handsets that can access expensive premium features very easily, sometimes by accident. These costs add up very quickly.

TAKE CARE WITH MOBILE DATA
Browsing the internet costs a lot more than making phone calls. Most Australian mobile data plans are smaller than you might realise, and it is very easy to exceed them, leading to very large bills. Additionally, if you have a smartphone, make sure you keep track of what your handset is doing in the background. Various data options are often defaulted to ‘on’.

BE VERY REALISTIC ABOUT YOUR NEEDS
Be honest about why you actually need a mobile. Basic calling functionality is generally the most anyone would ever truly need a phone for. Anything beyond that is a luxury, and luxuries are rarely free.

Our advice? If in any doubt, buy a handset outright, and go prepaid. You can always go on a plan later, once you better understand your needs usages patterns and choices.