Many young Australians now have mobile phones and that includes Indigenous people.

With lots of options out there, it’s easy to fall into the trap of paying too much each month for what’s needed.

Here are some of the things to think about when getting a new phone.

1. Working out the costs: pre-paid or plan

A plan

A mobile phone plan is a fixed-term agreement where you pay a fee, usually monthly, in return for a phone.

Often mobile phone plans look very tempting because they advertise the monthly cost, as opposed to the cost over the term of the contract you sign up for.

For example, a phone may be advertised for $40 a month, but over two years that ends up being $960.

It’s therefore important to look at the cost over the full plan term to see if it still fits with your budget. Each mobile phone provider should say the cost over the term of the contract. This is important information to look at.

The table below gives an example of what monthly costs equal to over a two year period. Some plans will be shorter or longer, so this is simply a general guide*.

*Costs may vary depending on add ons.

A better indication of what will need to be paid is the Consumer Information Statement (CIS) each mobile phone provider offers.

Some things worth asking before signing up to a plan:
– How much is the total cost over the plan’s term?
– What needs to be paid if the plan is exited early?
– Are there extra charges that may need to be paid?
– What happens if the phone is lost, broken or stolen?

For example, sometimes there is a set limit to data, which is used for streaming and social media. Going over the data limit can attract extra charges on the monthly bill.

Pre-paying

Pre-paying for a mobile phone means that you are buying the phone upfront and have to pay for additional usage, such as calls and data, as you go.

At the time of writing, new phones cost between $100 and $2000 depending on the model.

Phone users then buy credit from telecommunications companies like Telstra, Optus and Vodafone.

For example, someone may buy $15 worth of credit, which entitles them to $15 worth of calls, text and data use. When that is used up, more will need to be purchased.

Pre-paid phones often come with a SIM card, which goes inside the phone and is used to send messages, make calls and keep a record of phone use.

For some, the pre-paid route is more budget friendly because the biggest cost is generally paid at the start. It depends on the individual though – there is no right solution for everyone.

Some things worth knowing with pre-paid phones:
– How long does credit last?
Some providers have an expiry date on credit, which means you have to use it within a certain time frame.
– Are there additional costs for data use?
– Is the phone SIM unlocked?
This means you can potentially change to another carrier if they have a more competitive offering.

2. Coverage

It’s important to have a mobile phone that will be able to be used in your local area and to places you frequently travel to.

Not all areas have equal network coverage. Before buying a mobile phone with a certain carrier, it’s worth asking which areas are covered by their network.

Some of the bigger carriers now have coverage maps, which can be used as a general guide:
– Telstra
– Optus
– Vodafone

People looking at mobile coverage may notice mention of 3G, 4G and 5G. These are the technologies that allow you to use the internet on a mobile phone.

What’s the difference between them? The higher the number, the newer the version of the technology. Newer versions sometimes mean faster speeds. The downside is the coverage with newer versions may not be as good.

3. Data usage

It’s becoming far more common for people to use their mobile phone to look up the internet, stream or for social media.

This can affect how much is charged on a monthly plan or through pre-paid credit.

Every time a mobile phone is used to connect to the internet, it uses data.

Before buying a mobile phone, it could be worth making a quick list of what mobile tasks require the internet. This may include:
– Emails
– Picture messages
– Browsing websites
– Watching shows or movies on streaming platforms like Netflix and Stan
– Watching videos on Youtube
– Going on Facebook, Instagram, Tik Tok and Snapchat

Some people will use the internet a lot, others won’t. Knowing how much it’s used on a weekly basis can be an indication of how much data is needed.

Learn more: What to do if you’ve been sold a mobile plan you can’t afford

Further reading

– MoneySmart’s guide to choosing a phone plan – If you’ve chosen to go with a plan, here is some more info on what to check for.
– ACCC: Managing Data Usage – Some more information on how to stay on top of data
– Koori resources: Consumer Affairs Victoria – A longer checklist of what to look for before getting a mobile phone.

This article is not personal financial advice.