Mobile phone debt ‘an increasing problem’

The rising cost of telephone bills is causing consumers in the UK to slip further into debt.

Research by the Money Advice Trust has discovered that since the launch of the iPhone six years ago, there has been a 261 per cent increase in people getting in touch over being in debt due to their mobile.

In the first eight months of the year, 13,398 people sought out advice on how to bring their financial situation under control – the figure was only 11,698 for the same time period in 2012. 

Indeed, since 2007 there has been a steady increase in the number of people looking for assistance with their telephone debt – in 2012 it made up nearly ten per cent of all queries. 

Part of the problem is that with improvements in technology, people can do much more with their phones, but many of these additional activities come at a cost. On top of this, monthly contracts have spiralled in the past few years.

Some 15 per cent of those with telephone debts were found to owe over £1,000, highlighting how it is a serious problem and so individuals need to make sure they are budgeting properly for such an expense.

Smartphone revolution 

There is no doubting that smartphones have dramatically changed the way most people live their lives, as it means they basically have a mini computer in their hands that can connect to the internet and carry out all manner of functions. 

Joanna Elson, chief executive of the Money Advice Trust, noted a four-member family could easily be paying £140 a month on smartphone contracts, which she pointed out is higher than the average energy bill. 

"When you take out a contract for a smartphone you are in effect taking out a loan to pay for the handset. Smartphones are sold without contracts for upwards of £500, which would prohibit many from getting hold of one, but with a contract the upfront cost all but disappears, to be replaced by a monthly fee incorporating much of the phone's usage costs as well. When people fall foul of that monthly fee, they can find themselves with a growing debt problem," Ms Elson stated. 

She added consumers need to be responsible and recognise that they should only be taking out credit contracts if they can afford them, while mobile phone companies also need to demonstrate understanding if people are struggling.

Debt management 

If individuals do find themselves in debt as a result of mobile contracts and other outgoings, taking the right course of action is essential. A debt management plan is an informal solution that allows those with relatively modest arrears (at least £1,500 owed to more than one creditor) to bring their situation under control. 

In order to qualify for the scheme, people must be able to pay £100 a month, however, in exceptional circumstances this can be reduced to £80. This one affordable monthly payment will help people get debt free. 

By Joe White