How to stop paying ‘loyalty tax’

How long have you been with your broadband provider, energy company or mobile phone network?

If you've been with the same one for years, there's a chance you're paying more than you need to.

This is because while new customers are often tempted in with bargain deals and special offers, existing customers can end up paying over the odds.

It's what's known as the loyalty tax, and it's time you stopped paying it.

And you don't necessarily need to make huge changes to save money.

Here's how to ditch the loyalty tax.

Do your homework and compare, compare, compare!

The first thing to do is to find out exactly what you're paying.

Dig out your latest bills and check how much you're spending on your broadband, mobile, energy or other household services.

Don't forget to look for any discounts that are about to expire or price rises coming your way.

Next, see what other providers are offering. Comparison websites are a great place to start, but don't just look at the cheapest headline price. Check:

• The full cost: is the price an introductory offer that will shoot up after a few months?
• The contract length: will you be tied in for 12, 18 or 24 months?
• The extras: are installation, delivery or exit fees included?
• The service: are you getting the speed, data allowance or features you actually need?
• The small print: are there any price rises or additional charges to watch out for?

You should also be aware that comparison sites sometimes feature deals labelled 'ad' or 'sponsored'. These may be promoted placements where the site receives commission, so don't assume they're automatically the cheapest or best option. Check a few comparison sites and providers' own websites before making your decision.

If you’ve found a better deal, save a screenshot or ask the provider to email you a quote. You'll want the details to hand when you speak to your current provider.

Give your current provider a chance to beat it

Now you're armed with the facts, pick up the phone or jump onto live chat.

Tell your provider you've found a better deal elsewhere and ask whether they can match it or offer you something cheaper.

You could say:

"I've been a customer for a number of years, but I've found a better deal with another provider. I'd prefer to stay with you, but can you offer me a better price? Otherwise, I'll have to consider switching."

And don't be afraid to haggle. You don't need to be rude or pushy, just be polite, confident and clear about what you want.

Take the deal – or take your business elsewhere

If your provider comes back with a better offer, great! But before you agree, check exactly what you're getting.

Ask for confirmation in writing and make sure you understand:

• your new monthly payment
• how long the offer lasts
• whether you'll be tied into a new contract
• when and how much your price could increase
• whether any additional fees apply

If you're not convinced, take some time to think it over. There's no need to rush into a decision.

And if your provider won't budge, it might be time to walk away.

Switching can sound like a hassle, but it's often much easier than you think. Many services have switching processes designed to take the admin off your hands. Just check what you'll need to do before cancelling your existing service.

Don't cancel your existing service before checking the switching process. For some services, your new provider will arrange the transfer for you, and cancelling separately could cause unnecessary disruption.

What if you’re still in a contract?

If you think you're stuck because you're halfway through a contract, you may still be able to switch, but leaving early could mean paying an exit fee or early termination charge.

Before making a move, check your current contract and find out exactly how much it would cost to leave.

Then do the maths:

• Work out how much you'd save each month with the new provider.
• Multiply that saving by the number of months you'd benefit from the cheaper deal.
• Deduct any exit fees and other switching costs.

If the money you'd save is greater than the cost of leaving, switching could still be worthwhile.

Just make sure you're comparing like for like and factoring in any new contract commitments.

Don't forget to put a reminder in your calendar

You've done the hard work, secured a better deal and hopefully saved yourself some money.

But don't let the loyalty tax creep back in.

Make a note of when your introductory offer or contract ends. Set a reminder a month or two beforehand so you've got plenty of time to shop around again.

It's also worth reviewing your regular bills once or twice a year. Even if you're happy with your provider, that doesn't mean you couldn't get a better deal elsewhere.

You don't need to switch everything overnight, and you don't need to spend hours negotiating with providers.

Start with one regular bill, see what else is available and ask your current provider what they can do for you.

A little effort now could mean more money in your pocket every month.