Mobile phones
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What is a prepaid phone?
Prepaid phones allow you to buy your handset without signing a contract or needing a credit rating.
To make calls you buy phone cards in advance so you don't get phone bills or build up credit debts. When you run out of money on your phone you top up by buying a new phone card.
You can get a prepaid phone any age provided you have the money to pay for it.
What is a mobile phone contract or payment plan?
If you decide to use a payment plan you will need to sign a contract which means you have legal obligations to meet. You don't just buy a mobile phone, you also 'buy' a connection to a service provider and some form of credit (the payment plan or fixed term contract).
You have to be 18 to sign a mobile phone contract. Often companies will require an adult to guarantee the contract, which means that if you fail to pay your bill they will have to pay it. Technically the contract can be transferred into your name once you turn 18 but may not happen automatically as the company may require a credit check, more than one form of ID and a credit card.
In some situations young people do have legal capacity to act on their own behalf. If you have sufficient understanding of the significance of what you are doing, you may make a binding contract for the necessities of life. Each legal situation needs to be assessed on its own merits and you should get legal advice.
What things should I consider before deciding on a phone?
If you are thinking about getting a mobile phone, updating a current phone or changing plans do your homework first.
Always remember that there is no such thing as a free phone!
You need to ask yourself:
- Can I afford a mobile?
- Do I understand what the contract says?
- Is this phone a good buy?
Before you decide:
You should seriously think about what you will use the mobile phone for and whether you will be able to pay the bills.
Work out how much money you have left after paying all your other expenses. If you are considering a mobile phone contract you should also think about whether your financial situation is likely to change between now and the time your contract expires.
Shop around
Think about what you'll use your phone for, how often, and what time of the day you will use it most.
Consider asking questions like:
- Do I have to pay for the phone and connection?
- What are the call charges to different places at different times? When is 'peak' and 'off-peak'?
- Is there a minimum charge regardless of how long your call lasts?
- How is your call billed: per second, per 30 seconds or per minute?
- Is it cheaper to call other phones connected to the same network?
- How much are extra features like voicemail and SMS?
- Do you pay for someone to leave a message and do you have to pay to retrieve messages?
- What's the minimum monthly payment? Are there any free calls?
- What are the ongoing commitments, is there a cancellation fee?
- If you buy a second-hand phone is the simcard unlocked? Some carriers charge to unlock simcards.
Understand what you are signing up to
If you decide to go with a mobile phone contract or payment plan option make sure you ask any questions (and understand any answers you are given) before you sign any contract or ask someone else to sign one for you (like your parent).
Often the contract that you are being asked to sign will not contain all the terms of the contract just the most relevant ones. To get a copy of the entire contract with all the terms and conditions you can usually visit the service provider's website (like Telstra, Virgin, Optus or Vodaphone). Make sure you check out any penalties or charges where the service provider will make you pay money is something happens.
Once you sign up, you are committing to monthly payments, call charges and service fees you need to make sure you understand how much this will cost you so you can budget for it. You need to understand what you are getting yourself into because it can be expensive to cancel a contract that isn't working for you.
Use your phone responsibly
Be aware of how much calls cost including how many you make, how long you stay on the phone and the time of day that you make calls. If there is a competition that requires you to call or SMS or if you are registering votes for Australian Idol or Big Brother find out how much each call is going to cost you.
If you let a friend use your phone you will be still charged for calls that they make. If your phone is lost or stolen you may also have to continue to make minimum payments- check your contract. It is illegal to sell you phone while it is still under a service contract.
What if I have been asked to be a referee or guarantor for a friend?
If a friend asks you to be a guarantor or referee for their phone don't do it. Most likely you will be noted as the owner of the phone and will be liable to pay for any calls made on it.
What if I can't pay or I want to break the contract?
If you find that you have signed up to a mobile phone contract or payment plan that is beyond your budget and you get behind in payments contact the phone company to see if you can negotiate an arrangement to pay that you are able to manage.
If you don't do something about either the situation the phone company can take you to court and may get a judgment against you which can lead to a 'black mark' on your credit record. In fact you can get a 'black mark' on your credit file when you just default on payments and there is no judgment. This means it will be difficult for you to get credit and in some cases you may not be able to get credit at all.