Why “sticking with what you know” could be costing you hundreds a year
We are taught that loyalty pays off. In some markets, longstanding customers can pay much more than new customers for the same services and this is known as the ‘loyalty penalty’. It happens when suppliers charge higher prices to their existing customers, who they think are unlikely to switch to get a better deal. The result is that in many cases, people who stay with their supplier end up paying significantly more.
Many services are paid for through automatically renewed or rolled over contracts. While this can sometimes be convenient for customers, it also increases the chances that customers who get rolled over year after year will end up paying more.
Energy bills are the ones we’re most aware of, as it’s a major household outgoing and price hikes often hit the news. But it is all too easy to forget about the other smaller bills: home and car insurance, breakdown cover, broadband, mobile contracts, Sky TV and streaming bundles. They are set to renew every year, often with a price increase built in.
Sometimes the penalty shows up as a sudden jump once an introductory deal ends, or it might be a series of small increases that add up year after year. Sometimes you simply find out, often by accident, that a new customer is getting a far better deal than you for the exact same service. The loyalty penalty is significant and impacts many people, including those who can least afford it. When the best rates are reserved for new customers and lower prices are almost never offered to the people who have been there the longest, people end up feeling ripped off and annoyed at the injustice. Broadband customers, for example, face an average loyalty penalty of £113 for every year they stay in their contracts after their initial contract period ends, which is a 43% increase on the initial price.
Why do people stay?
Not through choice, as almost nobody is deciding to overpay on their household bills out of loyalty to a certain provider. Most people are simply too busy and have far more pressing things on their mind or they do not realise how much they could be saving.
They are too busy. Comparing energy tariffs and sitting on hold to providers cancellation lines takes time that many people simply do not have between work, caring responsibilities and everything else life throws at them.
They do not feel confident challenging a provider. This is especially true for older customers and anyone who finds the process of switching, or the idea of a difficult phone call, genuinely daunting.
It does not feel worth the hassle for what looks like a small saving. Except it rarely is small. A few pounds a month on broadband, a bit more on insurance, an annual increase on breakdown cover: when added together across a household’s bills, these numbers start to become significant.
None of this needs to be confrontational. Asking for the best price or shopping around to find the same things cheaper elsewhere is not about picking a fight with your service providers. Treat this as a change in mindset: getting a fair price is worth your time once a year, in much the same way you might check and weigh up the best prices on a supermarket shop.
What can you do to avoid the loyalty penalty trap, without it becoming a full-time job
- Diarise the renewal date yourself, ahead of the provider’s notice. Providers are required to tell you when a fixed deal is ending, but by the time this arrives you don’t have much time to shop around or challenge the renewal amount. Add renewal dates for your broadband, insurance and breakdown cover to your calendar as soon as you take out a new deal and set a reminder to review these a month before they are due to end.
- Spend ten minutes on a comparison site before you call, so you have a specific competing price in hand, rather than a vague sense that your renewal seems expensive.
- Ask the direct question to your existing provider’s retention team. A simple “I’m thinking of switching, can you match this price before I do?” often works well and saves the bother of actually switching.
- Check what you are actually using. Ofcom’s research found 70% of people who pay for broadband and a landline together almost never use the landline for making calls, and most mobile customers use only a fraction of their data allowance. Dropping what you do not use is often the single easiest saving available.
- Bundle deliberately, not by default. Combining broadband, TV and mobile with one provider is usually cheaper than buying them separately, but only worth it if you would have chosen all three anyway.
- If a household member finds this stressful, do it together. A ten-minute conversation over a cup of tea is often all it takes to make switching or calling a provider feel a lot less daunting.
Avoiding the loyalty penalty trap and getting a better price is not about confrontation. It is a small, steady habit that keeps more money in your pocket each month, and for anyone whose finances are already stretched thin, that difference can matter more than it looks.
A word on fairness
We are aware that everything here assumes you have the time, confidence and a bit of financial headroom to shop around, but it would be wrong for us to pretend that is true for everyone. If money is tight and your credit history isn’t great, then preferential interest rates or moving to certain providers may simply not be an option.
If you find that you are struggling to keep up with your debt repayments each month, then an Individual Voluntary Arrangement, or IVA, can reduce the cost of your debt to a single, more affordable, monthly repayment.
IVAorg CIC is a not-for-profit, ethical IVA specialist. We only ever recommend an IVA when we are confident it is the right solution, and if an IVA fails to complete through no fault of the client, we pledge that all fees paid are redirected to reduce their debt. If rising costs and mounting bills have become unmanageable, our team is here to talk it through, with no pressure and no judgement.
For more information call us now and arrange a free and confidential consultation with one of our IVA specialists: 0800 856 8569.
Sources:
Ofcom, “New Ofcom research reveals how to cut phone and internet bills” (published 26 February 2026, last updated 30 June 2026): https://www.ofcom.org.uk/phones-and-broadband/bills-and-charges/new-ofcom-research-reveals-how-to-cut-phone-and-internet-bills
Financial Conduct Authority, “FCA confirms measures to protect customers from the loyalty penalty in home and motor insurance markets” (2021): https://www.fca.org.uk/news/press-releases/fca-confirms-measures-protect-customers-loyalty-penalty-home-motor-insurance-markets
Citizens Advice, “Exploring the loyalty penalty in the broadband market” (2017): https://www.citizensadvice.org.uk/policy/publications/exploring-the-loyalty-penalty-in-the-broadband-market/
