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Watch out! Choosing the wrong option at O2 when you buy an iPhone could cost you hundreds of pounds!

A few weeks ago I wrote how about ways to save money on your mobile phone contract. One of the top tips to cut your bill is to buy your phone handset separately, and get a SIM Only deal.

I did just this. I bought the iPhone 6s from an Apple shop and switched to from O2 to Three. Of course you need the upfront cash to do this, but through this and a couple of other tricks I’ll be better off by more than £350* over two years.

How the SIM Only and buying a separate handset saves you money

A quick example of how this works. On O2, an iPhone 6S 16GB with 1GB of data will cost you £1049.99 over two years.

With the basic price of that iPhone costing £539 and O2’s equivalent SIM only deal, you’d actually spend just £899.

That’s £150 less!

BUT STOP! Before you get on the phone to O2 for an upgrade, there’s something you need to watch out for.

O2’s “Pay upfront” rip-off

On O2’s website, there’s an option to “Pay for your device upfront”. Sounds like what you’re after doesn’t it?

Here’s the pricing for an iPhone 6S 16GB, and the monthly contract.

O2 iphone con

Well the monthly price is certainly cheaper than O2’s normal contract rate. But there are a couple of problems.

£90 more for a iPhone

The first – and the most disgusting – is the price of the handset is £90 more than if you bought it at an Apple shop!!

The reason you normally pay more for a phone when on contract is you are borrowing money to pay for it. Essentially you’re charged interest. If you don’t have the money upfront, this method does give you access to the latest handset.

But here, you’re buying upfront and therefore not paying off the phone each month. So where do they get the extra £90?

It’s the same for the other models. The 64GB is a staggering £110 more in this O2 tariff than at the Apple shop, while the 128GB is also £90 more.

With the iPhone 6S Plus it’s £110 more for the 16GB version, £90 for the 64GB and £70 for the 128GB model.

And it’s the same if you want to buy the iPhone 6 and 6 Plus outright.

They’re charging more per month too

The second rip-off with this offer is the monthly charge. The logic of buying the phone upfront is to lower your monthly price. It should be the same as O2’s SIM only offers surely?

Well, they aren’t. Sneakily, you can’t compare exact tariffs between the iPhone contract and SIM only as they don’t offer the exact same packages.

The basic O2 offering is 1GB data and unlimited minutes and texts. However, if you went SIM only, you could save £2.50 extra a month by choosing 1000 minutes, unlimited texts and 1GB of data. Does anyone really use more than 1000 minutes a month?

With SIM only you could also opt for 2GB of data and unlimited minutes and texts for £18. For most people that’s a decent amount of data, and £3 a month less than the 3GB option you get when you buy the package from O2.

You’re also tied in to a 24 month contract, when the SIM only deals are for just 12 months, reducing your flexibility.

Taking advantage of customers

I can’t see how this is anything but an attempt to take money from people who’ve heard you can save by buying the handset upfront.

Yes, you do save £40 with O2 by choosing this option over their other contracts, but in reality you’re down at least £170**. If you chose the 64GB iPhone 6S or an option with more data, the loss gets even bigger.

There’s absolutely no reason the phone should cost more than it does at Apple.

It’s shocking stuff from one of the UK’s biggest phone retailers.

Doing your research can save you hundreds

So what’s the lesson from all this?

Mobile phone contracts, broadband and pay TV are among the worst for making it difficult for customers to know what it’ll cost after special offers. Packaging them together makes it even trickier to work out what each element costs.

They’re also industries geared to upsell you to choose more data than you really need and more TV channels than you can possibly watch.

The best way to protect yourself from missing the best price is to calculate the total cost, then shopping around and comparing that price.

>> Read my other tips for paying less on your mobile phone contract

* £350 calculations: My iPhone 6S 64GB cost £520 (saving £100) as I bought it on holiday in the USA, and I’m paying £11 a month on a negotiated Three SIM only deal (totalling £783 over two years), compared to similar tariff with O2 (totalling £1,134).

** Calculated on the 1GB, unlimited minutes and texts (at £17.50 a month) plus £629 for an iPhone 6S 16GB vs the 1GB, 1000 minutes, unlimited texts (at £15 a month) and £539 for the same phone direct from Apple.


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