Thrifty Living: Get the lowdown on mobiles

As recently as 10 years ago, most people survived perfectly happily without mobile phones. Today, however, it's hard to think how you'd get by without one – and many of us quite happily fork out upwards of £50 a month on regular contracts. That's £600 a year on something that we didn't even know we needed until quite recently.

The good news is that the mobile market place is now incredibly competitive, meaning it's quite possible to get everything you want from your phone without spending a fortune. If you're coming to the end of a contract, don't sign up to a new one unless you're paying less per month, or getting much more for your money. And think twice about throwing away your old phone.

Pay as you go

The first decision you need to make when shopping for a mobile phone is whether to go for a monthly contract or a pay-as-you-go (PAYG) arrangement.

As a broad rule of thumb, you should consider PAYG if you make less than 150 minutes of calls per month, and send less than 100 texts. However, the decision will also depend on who you're calling and what time of the day you're doing it.

If you opt for a PAYG deal, you'll have to pay for the phone yourself and then buy minutes as and when you need them. The advantage is that you always know how much you're spending on your phone. But the downside is that call charges are relatively expensive – typically around 20p a minute and 10p per text, but sometimes much more.

Three and Orange offer two of the best value PAYG packages. Three charges just 12p a minute and 12p a text to any UK landline or mobile. It also offers free Skype-to-Skype calls, which can be great for making cheap calls abroad.

Orange offers PAYG customers a once-a-month bundle of free call time or texts when they top up their phone. So although the standard call charges are 20p a minute (and 10p per text), you'll get 120 free minutes when you top up by £10 on its Canary package, or 300 free texts when you buy £10 on its Dolphin package. If you're only a moderate phone user, this kind of deal might see you through to the end of the month.

Bear in mind that the big expense when it comes to PAYG is buying your phone. Although you can get these for as little as £20, it might be worth asking family and friends if they have got old handsets which they no longer need. If they were linked to another network, you may need to "unlock" them first. To do this, call the old network and ask for the code. There may be a charge.

Contract

If you're a heavier phone user, you may prefer to go for a contract – this will almost certainly work out cheaper. The trick, however, is making sure you get on the right package. Although there are only five phone networks – Orange, O2, 3, T-Mobile and Vodafone – there are also a number of other providers who piggyback onto these networks, such as Virgin Mobile (which uses T-Mobile) and BT Mobile (which uses Vodafone). Each of the providers will offer a number of different packages, so it's well worth doing a thorough shop around before you commit.

One of the big advantages of signing up to a contract is that you'll get your handset for free. And you may also be able to secure significant discounts on your line rental – or even free gifts or cashback – if you are switching to a new provider.

Phone networks are now obliged to switch over your old number to a new network in just two days, so there's no reason to not consider all the different providers when you come to the end of your contract. Nevertheless, don't forget your existing provider. A call to the sales team threatening to leave the network can often throw up some great offers.

Don't forget that you can still sign up to a new provider, even if you're under contract. Simply switch your old number to the new provider, and switch your old package onto the cheapest option available. You'll have to keep making the monthly payments until the end of the contract, but it may still work out cheaper if you get a good deal.

When deciding what contract to go for, take a look back at old bills to see how many minutes and texts you tend to use each month – and check where the calls are too. Some networks will charge you more for calling mobiles on other networks.

Finally, be wary of too-good-to-be-true cashback deals. You're better off taking an automatic discount to your line rental, or taking away a gift instore, than signing up to a cashback plan which requires you to make a claim in a few months time. Brokers are notorious at not honouring these agreements.

To compare the best deals on the market at the moment, take a look at comparison sites such as onecompare.com or moneysupermarket.com, or try visiting a high street broker such as Phones4U or the Carphone Warehouse.