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.