There are many types of phones and options for plans available, so it is important to carefully select the right option for you based on your budget and needs.

Plans, regardless of whether they are on prepaid or monthly contracts, generally include calls, texting and data allowances. Data plans allow you to access the internet, download apps and receive emails without the need to connect to a wifi network. Be aware though, because exceeding the data package can mean large extra costs on top of your regular payments. It is not wise to travel overseas and leave your data package running, as overseas data can cost many times more than what we are charged at home.

A ‘plan’ is a monthly contract for the use of a phone, usually for a period of 24 months. You pay an amount each month to use the phone, which includes a monthly cost for the purchase of the phone as well as a specific amount of credit for calls, texts and data.  Additional text plans and data plans can be added to your monthly account if you find that you use more than your basic plan allows for.

Before entering into a plan, make sure you understand what you will be paying for each month. The charges for going over your plan limit can be very high – if you go over your included credit the phone company will not stop you from making phone calls, using the internet or texting, but they will charge you for that at a higher rate.

The sales person may think they know exactly which phone plan you need, but make sure you know the details of the plan before you sign up – do your research before you walk into the shop, read the Critical Information Summary, and ask questions.

Always read and understand the terms and conditions before signing a contract.

Prepaid phones and recharge cards can be a sensible option for some people. It allows you to pay a specified amount in exchange for credit and you cannot spend more than you paid for so you will not go into debt. Once the credit is spent, you can no longer make calls or text, but you may still be able to receive them.

You can manage your usage by logging into your online account and checking how much you have used of your available credit.

For more information, and some great advice, check out ASIC’s MoneySmart Rookie Phoney Deals video.