What You Should Know About Early Termination Fees

Even though there has been a lot of reform in the cell phone industry, one area that is still troublesome is early termination fees.  It is probably the most costly potential fee, and it is also the one the consumers have: the least control over and the least knowledge of.  Here is what you need to know about early termination fees so you can avoid the potential big cost.


What is an Early Termination Fee?

An early termination fee is just like what it sounds like: if you end your agreement with your cell phone provider early, you must pay a fee.  The lengths and fees vary, but the most common length is two years – and the most common fee value is now $360.  Most providers do offer a 30 day grace period to return the phone and avoid the fee, but after that, you are subject to it.

A second aspect to the Early Termination Fee is that it is prorated down each month you continue as a customer.  The reason $360 is the most common fee is that most providers will reduce that about by $15 for each month that you are a paying customer.  So, if you quit after one year, your early termination fee is lowered to $180 (12 months x $15 = $180).  After the two year period is up, you are free and clear of the early termination fee.


The Catches (There Are Many!)

With these fees, you NEED and MUST read the fine print of everything you do with your cell phone company.  They will find any way and every way possible to keep you a customer, or make it painful for you to leave them.  Here are a few catches that you should be aware of when dealing with the cell phone company.  These are the most common, but you should really pay close attention, as 9 times out of 10 the sales rep will NOT tell you.

  • Renewal: After your two year contract is up, many times the company will contact you and ask you to renew your contract.  They may even throw in a free phone.  The catch is that your contract renews, and you may have to pay the early termination fee.  If your contract is expired, you don’t have to do anything, just keep paying your bill and everything stays as it was initially agreed upon.  It is only when you agree to renew that you are stuck back in early termination fee land.
  • Upgrades: Do you want to upgrade your phone?  Chances are, you will have to agree to another contract period, where early termination fees apply.  Many cell phone clerks won’t tell you this, so it is essential that you ask if you are required to commit again for a set period of time.  Chances are, you can pay more for your upgraded phone, and be free of any contractual obligation.
  • General Questions:  Have a question to ask?  Want to know something about your account?  Many cell phone representatives are unscrupulous, and get paid a commission for changing anything on your plan.  Be careful!  Just having someone access your account may qualify as a renewable event – it may not even be for 2 years.  Maybe just 6 months or 1 year.  I personally had this happen to me without my knowledge, and it turns out the clerk did it to try and earn a commission.  Be very careful and read everything thoroughly.  If you have an account question, your best bet is to call the direct 1-800 number of your cell phone company, and NOT go into their stores.
  • Early Anything:  Is the clerk trying to sell you on an early upgrade?  Is he telling you that you can use another number on your account to qualify?  All of these early “anything” or using a different number on the same account will get you locked back into a contract.  Be very careful, and read the fine print.  Make sure you ask as well, and feel if they are misleading you.


Don’t Get Trapped By Early Termination Fees

Early termination fees are designed to trap you with a company.  They are essentially a punishment for leaving early.  Don’t get suckered by unscrupulous clerks trying to make a buck.  There are so many ways that a cell phone company can trap you, so don’t fall victim.  If they hook you, there is no way to avoid paying the fee.  Your only hope is to plead your case to a sympathetic clerk, and even then, there are no guarantees.


Readers, have you had problems with early termination fees?  I’d love to hear your cell phone company horror stories. 

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  1. says

    I’m still upset at the lack of competition in the cell plan provider market. When a little guy comes along and offers a fair deal, he gets bought by one of the big 3. Early termination fees are a way of collecting on the expected value of a new 2 year agreement. But with the new technology that is being shoved in our face every month, who wants to lock in a phone for 2 years when it will be obsolete in 2 months?

  2. says

    We always make sure to fully understand the contract details anytime we make a change to the cell phone plan, whether it be a new phone, new line, etc. We get any changes (or information that the termination period won’t change) in writing. We also go back afterward and make sure that everything shows up as it was promised, to avoid any surprises. Many people don’t follow-up and then get burned months down the line when it’s probably too late to appeal to your carrier if something is amiss.

  3. says

    i think this is a good point that the termination fees become less and less as your term expiration date draws closer. Some people are too scared to switch to a new carrier because of the termination fees when in reality, it’s not that much if it’s close to the expiration date.

  4. says

    I wish U.S. carriers would offer plans similar to those in other parts of the world. I would love to be able to buy my phone outright and then pay a reduced amount each month.

    As it is now, you’re essentially paying extra each month to cover the subsidy on your phone, but when your 2 years are up you continue paying the same amount whether you get a new phone or not.

  5. says

    We unfortunately have different rules here in Canada and we can’t always get around them. I have had to deal with contract breaking fees in the past and they suck. Even right now I am looking around to switch but well aware it will cost me some money up front. I really think this kind of thing should not be allowed.

  6. says

    I hate early termination fees but I will tell you this. If I want to get out of the contract, I might pay whatever it takes. Of course if I have a good reason for that. :)

  7. Vatsal says

    Hey, could someone please clarify that if you terminate your contract early, does your phone become unlocked? I asked this to an AT&T clerk and he said that you cannot change service provider until the end of the contract period!

    Then what would be the point of my early termination if i am stuck with the same service provider?

    Any one knows otherwise?

    • says

      No, the phone does not unlock when your contract expires. The clerk means you are free from early termination fees, but your phone is still bound to the network which it is setup for.

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