SmartphonesThe smartphone market is a bit of a blur to me, with deals left, right and centre and lots of different ways to pay. So what is the cheapest way to buy a new one?

Apple fans will be well aware of the rumours of the new iPhone coming out this September, but when buying a new phone is it cheaper to sign up to a contract or get a sim-only deal?

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After years of dedication to my Blackberry, I recently upgraded to the Apple world and found the whole process very stressful.

To start with there are endless options to choose from, such as the length of the contract, how you pay and the size of the data allowance you will need. And the phone companies don't make the process any easier.

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It's most common for phone providers to offer longer contracts because they're then guaranteed a customer for the duration of the contract. But is this the best way to get a smartphone?

Pay monthly phones
When you buy a new smartphone on a pay monthly contract you'll have to choose a contract of 24, 18 or 12-months. If you want to cancel the contract early, there will be a penalty charge to cover the rest of the payments.

There's a full list of available deals on our comparison tables and the good thing about a traditional contract like this is that you can usually get a reduced, or sometimes free, handset.

The overall cost of the phone is swallowed into the monthly direct debit payments – so it's good if you've not got the money to pay upfront – but this also means you're locked into a deal for up to two years.

Within the bundle you'll have a certain allowance of minutes, texts, data and calls and you need to choose an option which meets your requirements. For example, if you only use your phone for the internet and never call anyone – go for a higher data allowance.

The main downside to this is that by the end of the term, the phone won't be worth as much as it was brand new – and therefore you'll get less money for it if you try and resell it.

Pay-as-you-go (PAYG) phones
My first ever phone was on a PAYG contract and I spent most of the time running out of credit and running up quite big bills. However, they are beneficial for certain people. As you only pay for what you use, this is good for people who aren't on their phones much.

There's also no credit checks involved or contracts so you can change your phone, or the way you pay for it, whenever you like without penalty. However, you'll need to pay upfront for the phone, and not all models – especially the more expensive versions - will allow this.

Sim-only phones
When looking at the overall costs of your phone, a sim-only deal works out most cost efficiently. This works by buying a sim card, with an allotted allowance topped up on it, and using it with your handset.

Most sim-only deals last around 30 days and they're a lot more flexible than the standard two-year pay monthly contracts.

For example, with Giff Gaff, you can get 250 minutes and unlimited texts and data for £10 a month. This is far cheaper than going through a traditional contract but you need to pay the upfront cost for the phone.

Even with that factored in, it still works out cheaper. Say you bought an iPhone 4S for £499. Over a year the phone, along with the £10 rolling contract, would cost £619. You also have the freedom to sell this whenever you like (such as when the new iPhone is released) and as you're not stuck in a longer contract the phone won't devalue as much.

However, a similar deal from Vodafone with this phone would cost £31 a month (over two years) with a £149 upfront cost. The contract is also not as good because it only includes 500MB of data.

How to ask for a cheaper deal
On the internet, and in a mobile phone shops, there will be certain deals available for everyone but it's always worth asking for more.

This is because providers know if you sign up to a contract with them, you're then guaranteed to be a customer for the next two years and they often throw in sweeteners to make sure you sign up (if you ask).

Each time I've ended a contract I've called the customer service department of my provider and asked what other deals are around. It's worth asking for more and helps if you've got information you can quote from other providers.

What to do with your old phone
When you're finished with your old model, instead of consigning it to the rubbish dump, sell it online and make yourself some extra cash. There are numerous websites online to help you with this, and a comparison of them all can be found on Sell My Mobile.

Right now you could make £211 from an iPhone 4, or £207 for a Samsung Galaxy S2 – which would go a long way to cutting the costs of a new mobile if you had opted for a sim-only deal.

10 of the biggest consumer rip-offs

  • 1. Mobile data roaming charges
    <p> <span style="text-align: left; ">Using a mobile phone to make and receive calls, send texts and browse the web while abroad can be extremely costly &ndash; especially if you are travelling outside the European Union (EU), where calls can cost up to 10 times as much as at home.</span></p> <div> </div> <div> To avoid high charges, Carphone Warehouse suggests tourists ensure a data cap is in place, use applications to check data usage, turn off 'data roaming', avoid data-intensive applications such as Google Maps and YouTube and use wi-fi spots to update social networking sites.</div>
    1. Mobile data roaming charges
  • 2. PPI
    <p> <span style="text-align: left; ">Payment Protection Insurance (PPI) is supposed to help people to continue meeting their loan, mortgage or credit card repayments if they fall ill or lose their jobs. However, policies are often over-priced, riddled with exclusions and sold to people who could not make a claim if they needed to.</span></p> <div> </div> <div> At one point, sale of this cover - which was often included automatically in loan repayments - was estimated to boost the banks' profits by up to &pound;5 billion a year.</div> <div> </div> <div> Now, though, consumers who were mis-sold PPI can fight back by complaining to the bank or lender concerned and taking their case to the Financial Ombudsman Service (08000 234567) should the response prove unsatisfactory.</div>
    2. PPI
  • 3. The Lottery
    <p> It could be you, but let's face it, it probably won't be. In fact, buying a ticket for the Lotto only gives you a 1 in 13.9 million chance of winning the jackpot.</p> <div> </div> <div> With odds like that, you would almost certainly be better off hanging on to your cash and saving it in a high-interest account.</div>
    3. The Lottery
  • 4. Budget airlines
    <p> No-frills airlines such as EasyJet may promote rock-bottom prices on their websites. But the overall fare you pay can be surprisingly high once extras such as luggage and credit card payment fees have been added - a process known as drip pricing.</p> <div> </div> <div> Taking one piece of hold baggage on a return EasyJet flight, for example, adds close to &pound;20 to the cost of your flight, while paying by credit card increases the price by a further &pound;10.</div> <div> </div> <div> It may therefore be worth comparing the total cost with that of a flight with a standard airline such as British Airways.</div>
    4. Budget airlines
  • 5. Credit card cash withdrawals
    <p> Cash advances, which include cash withdrawals, are generally charged at a much higher rate of interest than standard purchases.</p> <div> </div> <div> While the average credit card interest rate is around 17%, a typical cash withdrawal of &pound;500, for example, is charged at more than 26%.</div> <div> </div> <div> What's more, as the interest accrues from the date of the transaction, rather than the next payment date, costs will mount up even if you clear your balance in full with your next payment.</div>
    5. Credit card cash withdrawals
  • 6. Supermarket 'deals'
    <p> Supermarkets such as Tesco and Asda often run promotions under which you can, for example, get three products for the price of two.</p> <div> </div> <div> However, it is only worth taking advantage of these deals if you will actually use the products. Otherwise, you are simply buying for the sake of it, which is a waste of your hard-earned cash.</div> <div> </div> <div> To avoid paying over the odds, it is also worth checking the price per kilo to ensure that larger <a href="http://money.aol.co.uk/2012/05/24/supermarkets-slammed-for-multi-buy-rip-offs/">'economy' packs really are cheaper</a> than the smaller versions.</div>
    6. Supermarket 'deals'
  • 7. Train fares
    <p> Buy a train ticket at the station on the day of travel and the price is likely to give you a shock - especially if you are travelling a long distance at a busy time of day.</p> <div> </div> <div> However, <a href="http://money.aol.co.uk/2012/03/13/how-to-cut-the-cost-of-your-commute/">you can cut the cost of train travel</a> by 50% or more by going online and making the purchase beforehand - especially if you book 12 weeks in advance, which is when the cheapest tickets are on sale.</div> <div> </div> <div> Other ways to reduce the price you pay include avoiding peak times and taking advantage of so-called carnet tickets, which allow you to buy, for example, 12 journeys for the price of 10.</div>
    7. Train fares
  • 8. Packaged current accounts
    <p> Most High Street banks offer packaged accounts that come with monthly fees ranging from &pound;6.50 up to as much as &pound;40, with a typical account charging about &pound;15 per month.</p> <div> </div> <div> Various benefits, such as travel insurance and mobile phone insurance, are offered in return for this fee. But whether or not it is worth paying for them depends on your individual circumstances.</div> <div> </div> <div> Before signing up, it is therefore essential to <a href="http://money.aol.co.uk/2012/01/14/maximise-your-current-account/">check that you will make use of enough of the benefits</a>, and that you cannot get them for less elsewhere.</div>
    8. Packaged current accounts
  • 9. Overseas withdrawals/card payments
    <p> Overseas money transfers or travel money purchases attract the same high rate of interest as credit card cash withdrawals.</p> <div> </div> <div> Worse still, most credit cards &ndash; and debit cards &ndash; also charge you a foreign loading fee if you use them to make purchases while abroad.</div> <div> </div> <div> You can, however, <a href="http://money.aol.co.uk/2012/02/17/how-to-avoid-overseas-bank-fees/">avoid these charges</a> by using a Saga Platinum or Nationwide Building Society credit card.</div>
    9. Overseas withdrawals/card payments
  • 10. Premium rate phone lines
    <p> Numbers starting 0871 cost 10p or more from a landline, while those starting 09 can cost more than &pound;1 a minute <a href="http://money.aol.co.uk/2012/03/21/call-0800-0808-and-0870-numbers-for-free-from-your-mobile/">from a mobile phone</a>.</p> <div> </div> <div> And the operators of these high-cost phone lines, some of which are banks, often get a cut of the call charges.</div> <div> </div> <div> Most 09 numbers are linked to scams and should therefore be avoided at all costs, while 0871 numbers can often be bypassed by searching for an alternative local rate numbers on the saynoto0870.com.</div>
    10. Premium rate phone lines


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