Millions pay up to £38/mth for a phone they already own

Citizens Advice research shows three major mobile providers continue to charge customers for their handset, even after the cost has been covered as part of their fixed contract deal.

The charity says EE, Three and Vodafone don't reduce contract costs after fixed deals end, leaving millions unaware they are still being charged for the handset they already own.

It looked at over 700 different phone tariffs and found customers pay an average of £22/mth extra for a phone they already own. Separate analysis of contracts for high-end phones with an RRP of over £600 – such as the iPhone – showed some customers could pay up to £38/mth extra once their contract comes to an end.

Citizens Advice says about four million customers of the three major providers paid an extra £490 million after their contracts ended when they should just be paying for calls, texts and data. O2 has separate elements for the handset and the tariff, meaning once the handset is paid off, customers just pay for the usage.

If you're out of contract and paying more than £10/mth, STOP – you may be able to save with a . For full help, see .

More than a third stay on the same contract after their fixed deals end

Currently, mobile providers do not have to remind you when you're nearing the end of your contract, resulting in over a third of customers not switching to a cheaper deal.

The majority of phone contracts which include a handset are paid for monthly over a two-year period, meaning the handset is paid for at the end. Though the handset has been paid for, EE, Three and Vodafone continue to charge the same monthly price, meaning millions effectively start paying for the phone again. The research shows:

• Customers out of contract are overcharged £22/mth on average, rising to £38/mth if they have a mobile costing over £600.

• In 73% of cases, buying a handset outright and pairing it with a Sim is cheaper than a bundled contract with the same provider.

• 55% of consumers assume a bundled contract is the cheaper option.

• Older people are twice as likely to continue paying for a handset they already own longer than 12 months – being overcharged by up to £264 on average.

The figures come from a Citizens Advice survey of 3,030 people in July this year, which was weighted to be representative of the UK population.

'Mobile providers are knowingly overcharging customers for phones they already own'

Citizens Advice chief executive Gillian Guy said: "It is unacceptable that mobile providers are knowingly overcharging customers for phones they already own.

"We've heard a lot of talk from Government and the regulator, but now we need action. Other companies have already stopped doing this, so we're looking for these three major providers to follow suit.

"In the meantime, consumers should check their phone bills to see if they can save money with a Sim-only contract or upgrade to a new phone."

Stop overpaying. If you're out of contract, slash your costs NOW.

We've been advising you for years that you can slash your mobile phone bills by pairing your handset with a cheap Sim. Our 30+ Cheap Mobile Tips and Best Sim-only Deals guides have plenty of tips on how to keep costs down, but here's our top three:

• Happy with your handset? If you're paying more than £10/mth, STOP. Many of our top pick Sim only deals are on a rolling one month contract and offer great value. Currently you can get 5GB of data with 2,500 mins and unlimited texts for £9/mth. See Cheap Sims.

• Looking for a new handset? Do it the cheapest way. Always check if it's cheaper to buy it outright or on finance before signing up for a contract – and never go direct to the network as resellers usually offer the same deals for £100s less. See our Cheap iPhone and Cheap Samsung guides for the best ways to buy, or check if a cheaper phone could be better for you.

• Don't overpay for an allowance you don't need. Don't be fooled by networks pushing high data deals – our most recent poll revealed two thirds of you use less than 3GB of data per month. Before signing up, use a tool to help you work out how much you use.