Mobile phone companies are overcharging loyal customers by up to £38 a month, a shock report reveals today.

Analysis by Citizens Advice found customers of Vodafone, EE and Three who choose to stay on the same plan after their fixed deal ends do not get their bills cut - meaning they are paying an £22 a month extra for a handset they have already paid off.

The extra cost can be as much as £38 a month on for contracts with high-range handsets like the iPhone 7 128/256GB, the Galaxy S8 and the Xperia XZ Premium, it said.

iPhone users could end up being overcharged (
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Many consumers take out a contract with the cost of the new handset included in the overall price of the fixed term deal - most of which are paid off on a monthly basis over two years.

A separate study into costs and deals around the iPhone 8 said customers with a 256GB model could end up being overcharged by £46 a month on average.

Citizens Advice chief executive Gillian Guy said: “Some of the largest mobile phone providers are routinely overcharging their loyal customers.

“Mobile phones are now an essential part of modern life, but the way that the cost of handsets are hidden within some mobile phone contracts gives phone providers a way to exploit their customers.

“It is clearly unfair that some phone providers are charging loyal customers for handsets that they have already paid for.

“It’s especially concerning that older customers are more likely to be stung by this sharp practice.”

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Digital Minister Matt Hancock said: “It’s only right that mobile customers should be notified when they have paid off the price of their handset, and that their future bills should reflect this.

“I welcome Citizens Advice’s call for better billing information for consumers, and hope that providers will now take the initiative by clearly separating the cost of handsets and tariffs in mobile contracts.”

Nina Bibby, chief marketing officer of O2 - the only big British mobile phone firm not criticised in the study - said: “Forcing customers to continue to pay for a phone they already own not only hits their pockets but undermines trust and the reputation of the industry.

“We’d like to see the other operators review their position and follow our lead.”

What they have to say for themselves

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A Three spokeswoman said: "Whenever a new customer signs with us, we make the end-date of the contract term very clear.

"We encourage all Three customers to contact us if they would like to change their plan at the end of their fixed term deal.

"They can also check how much time they have left on their plan via the My3 app.

"We appreciate any feedback to help us improve our processes and are exploring new ways to ensure our customers can get the most out of their mobile phones at a competitive price."

A Vodafone UK spokeswoman said: "Wherever possible, we contact customers nearing the end of their contract to offer them a range of options."

EE said: "Separating phone and tariff doesn't always represent the best deal for consumers.

"It can sometimes result in them paying more, and EE customers have the flexibility to choose the tariff and upfront phone cost that's right for them.

"We send our customers regular updates about their options before and after they reach the end of their contract, and the vast majority of our customers upgrade to a new phone or move to a SIM-only plan near the end of their contract."

Making sure you're not overcharged

It seems obvious, but the most important thing is to know exactly when your contract is up.

For people limping along with a dying or broken handset, counting down until the day you can upgrade is pretty normal.

For those with a fully functional model things are a little less urgent.

The good news is a service like OneDox will even monitor this for you and alert you when it's time to switch.

Or simply checking your contract now, and putting the expiry date in your phone's calendar could save you a lot of cash for very little effort.

David Sheridan from OneDox points out just how simple it is to switch. “Simply by calling up my network and telling them I wanted a SIM-only deal, I immediately reduced my monthly bill by £24 a month,” he explained.

For a little more effort, bigger savings are possible.

"Shopping around as a soon as your contract is up is really important, even if your renewal looks compelling," said Victoria Leyton from CompareMyMobile.com.