Why You Should Consider Paying Your Early Termination Fee

The ultra-competitive prepaid market is producing some astoundingly inexpensive all-you-can eat rate plans. And breaking your cell phone contract to take advantage of them may be cheaper than you think.

That was the message during today’s press call by Consumer Action, a nonprofit consumer-advocacy group that opposes what it calls “excessive” early termination fees (ETFs). The group — which is funded in part by TracFone, the prepaid service provider — offered the following suggestions for users (like Stacey) who are considering ditching their carrier in favor of cheaper offerings:

  • Determine whether you are in the ETF “penalty box.” Users who’ve had the same phone and price plan for more than two years are probably unaffected by ETFs. Those who are subject to the penalties may have to pay only a prorated amount.
  • Do the math. A $150 penalty may seem steep, but it’s quickly offset if you can cut your $90 monthly phone bill in half.
  • Avoid re-upping with your carrier. Operators typically offer new phones or more attractive price plans to users nearing the end of their contracts in an effort to lock customers in for another two years.
  • Watch for carriers looking to change the terms of the contract. Major changes in terms can allow consumers to kill service without paying an ETF — which is an option Kevin over at jkOnTheRun began considering with his Palm Pre last week.

ETFs have become a hot-button issue in Washington, too, as evidenced by the FCC’s current probe into Verizon Wireless’ policies. Verizon recently doubled its ETF for some high-end devices from $175 to $350, claiming the move was necessary to stop users from taking advantage of its buy-one, get-one-free promotion for BlackBerry handsets only to kill service and sell the phones on eBay. The FCC today granted Verizon’s request for additional time to respond to the inquiry, pushing back the deadline to Monday. But with the FCC stepping up its role as a consumer-friendly regulatory agency, ETFs are likely to continue to be a point of contention between network operators and the Beltway in the months ahead.

Image courtesy Flickr user seretuaccidente.


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