10 Ways a Smartphone Drains Your Wallet

BOSTON (MainStreet) -- Glued to ears and palms, smartphones have become a ubiquitous possession. Always on and always available, they mean consumers have access to apps, websites and services no matter where they roam.

It is a huge business that has created a war for market share among those who make operating systems — Apple (Stock Quote: AAPL), Research in Motion (Stock Quote: RIMM), UMB Financial (Stock Quote: UMBF) and Microsoft (Stock Quote: MSFT); sell hardware — Motorola (Stock Quote: MOT), Samsung, LG, Nokia (Stock Quote: NOK) and Ericsson; and broker in connectivity — Sprint (Stock Quote: S), Verizon (Stock Quote: VZ) and AT&T (Stock Quote: T).

Anyone who has bought a smartphone is well aware of what their mobile device cost then, and what it costs to keep the data flowing.

But some costs may not be as easy to quantify or recognize. The upfront cost and ongoing fees are just the beginning of how this growing technology is shrinking your checking account. The following are 10 ways your smartphone addiction is costing you:

Phone envy
First, perhaps no other product niche inspires buyer remorse as regularly and quickly as smartphones.

Almost immediately after purchase you'll seem to start hearing about upgrades and even better models that make your phone feel outdated. Have an iPhone 4? Well, get ready to hear all about the new, Holy Grail-like iPhone 5 right around the corner. RIM will seem to announce a new BlackBerry as soon as your company issues one. Your HTC will feel DOA once you hear about the better processor and abundant features that could be yours.

In reality, your "old" phone is probably just fine for what you use it for. But the lure of a bright and shiny new toy is enough to get many to shell out hundreds of dollars and switch carriers almost annually.

Accessories
ABI Research, a market intelligence company specializing in emerging technology, has estimated that "aftermarket mobile phone accessories" will be a more than $50 billion industry by 2015.

"Smartphones are generally higher-value products than feature phones, so consumers are willing to spend more on the accessories for them," ABI senior analyst Michael Morgan says. "There is also a shift to higher-quality accessories, replacing the cheap, white-label products that characterized the market until recently."

Among the added accessories popular among consumers are protective and decorative cases, screen protectors, extra chargers, ear buds, noise-canceling headphones, stands, Bluetooth headsets, external speakers, belt clips and neck straps.

ABI estimates that the average smartphone owner has spent an additional $60 accessorizing their device.

The online shopping and review site Retrevo found that some smartphone owners spend much more.

It polled smartphone owners under the age of 35 and found that 9% of iPhone owners have spent $200 and up; 19% spent $100 to $200. Meanwhile, 6% of Android owners spent $200 and up, with 8% spending between $100 and $200.

Ninety percent of iPhone users described cases as a means of "self-expression," and 27% reporting that they had chosen a specific case to match an outfit.

App hoarding
Apps are insidious. With many selling for just a buck or two, there is an impulse to just click and install without much thought.

But over time those 99-cent apps can prove to be a gateway drug for more expensive programs and "pro" versions that can cost $5, $10, $30 or more. Before you know it, you can rack up more than $100 to $200 in apps, the majority of which you'll rarely, if ever, use.

According to survey data released last year by Nielsen (Stock Quote: NLSN), the average number of apps for smartphone users was 22: 10 for BlackBerry users, 37 for iPhones, 22 on Android systems, 14 on Palm OS/WebOS devices and 13 on Windows Mobile.

Time wasting
Time is money.

We all need some measure of mindless downtime to help us decompress from our hectic lifestyles. But the Internet is a notorious time waster -- "How did it get to be 4 a.m.?" -- and having the Web in the palm of your hand makes the minutes and hours evaporate even more quickly.

Nielsen recently conducted a study into smartphone usage with "on-device meters," software installed on the phones of participants that allowed tracking of what the devices were used for and for how long.

It found that the average Android consumer in the U.S. spends 56 minutes per day interacting actively with the Web and apps on their phone. Of that time, two-thirds was spent on mobile apps, one-third on the mobile Web.

Games have held their ground as the most popular category of mobile apps. In other research, Nielsen found that the average mobile gamer plays an average of 7.8 hours a month. Gamers using iPhones played about 14.7 hours a month; Android users frittered away 9.8 hours per month. Windows Phone 7 owners played only 4.7 hours a month and BlackBerry users played 4.5 hours of games each month.

24/7 Shopping
As a rule of thumb, one should never email an ex when overtired or drunk. The same goes for online shopping.

A scenario: You are bored, flipping between the Kardashian sisters and Jersey Shore because there's nothing else on. As you flip idly through the apps on your phone while watching, you check out Amazon (Stock Quote: AMZN), EBay (Stock Quote: EBAY) or Etsy. Before you know it, the ability to shop from the couch in your pajamas, in a near daydream state, leads you to start clicking items into your shopping cart. Any commercial that pops on the TV brings with it the risk you'll add that product to the queue as well.

Before you know it, you've hit "Proceed to Checkout" and bought a slow cooker, a new watch and a subscription to the Los Angeles Times.

In willing hands, a smartphone can easily turn shopping into late night recreation.

Early morning shoppers are also an important market.

Research by Mobclix, a mobile ad exchange, found that while other times see greater smartphone usage, the time iOS and Android users have been shown to be the most "engaged" with ads in mobile apps is from 8 to 11 a.m.

Impulse buys
Just like late-night shopping, smartphones amplify the impulses behind "impulse buying."

In a department store or supermarket there is at least a buffer between your shopping cart and the cash register -- and time to reconsider or think about prices.

But the ease of instantaneous buying introduces the dangerous (to your wallet) aspect of speed and lacks the restraint-inducing effect of actually having to count money out of your wallet.

In-app purchases, in particular add-ons for social media games such as Farmville and The Smurfs where what's bought is part of game play, can also cleverly spark spur-of-the-moment buys.

Weak-willed shoppers will be challenged even more in the months ahead as retailers find new ways to remove barriers between you and purchases. The British company txt2buy has launched a service enabling customers to instantly and securely buy from any media channel -- TV, billboards, online radio, print ads, etc. -- by simply sending a text message.

Countdown coupons
Ideally, online coupons save you money. Unfortunately, it is easy to fall for a "bargain" that gets you to pay more than you would have otherwise.

Apps and services such as Groupon, Gilt Groupe and Rue La La that combine discounts with countdowns add a sense of urgency that can give you an itchy trigger finger. Yes, you'll be saving 50% off dinner for two, but were you planning on that extra meal or tip within your monthly budget?

Deals too close to pass up
According to a report issued by analysts at ComScore (Stock Quote: SCOE) in May, nearly one in five smartphone users are using location-based services such as Foursquare and Gowalla.

Of the 16.7 million people using check-in services on their mobile devices, 12.7 million (76.3%) did so via a smartphone device. Android accounted for the largest share of check-in service users, with 36.6% checking in from an Android device, while 33.7% of users checked in from an iPhone, with Apple having the highest representation relative to its percentage of the total smartphone market. RIM accounted for 22% of check-in service users, while Microsoft, Palm and Symbian each accounted for less than 5%.

The growing usage of location-based services has marketers salivating over a new, direct way for advertisers to attract and entice spending.

Revealing debt patterns
The type of smartphone you use may correlate to your use of credit cards.

Research by Pageonce, a personal finance site that aggregates users' accounts, used its data to see consumer differences across mobile device platforms.

It found that "iPhone users leverage credit cards significantly more than Android, Blackberry and Windows Mobile users." The average iPhone user has a 35% higher balance -- carried balance plus new transactions plus any fees and charges -- on their monthly credit card statement than the average Windows Mobile user.

"This might mean that iPhone users have more debt," Pagesource COO Steve Schultz wrote on the company's blog. "Or it could mean iPhone users simply run more expenses through their cards. Or, maybe, Android users are more conservative about using credit? Whatever the reason, I'm betting credit card companies would like to get their hands on more iPhone users."

The Pagesource data also showed that Windows Mobile users have the highest mobile-phone bills (current charges plus any past due) -- 24.5% higher than the average iPhone user.

Theft and loss
The size of smartphones make them easy to drop, leave behind or be swiped.

According to the FBI's National Crime Information Center, more than 80,000 mobile phones are stolen -- via robbery or pickpocketing -- each year. Police departments across the nation have blamed iPhone thefts in particular for larceny spikes, in particular at subway stations.

Adding to the out-of-pocket cost is identity theft, unauthorized charges and data breaches.

Regardless of how your phone might be hurting your wallet, there are plenty of ways they can make your life a little easier, too. Check out MainStreet's look at the best productivity apps in our roundup of the best back-to-school smartphone apps!

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