Spotting, Avoiding Costly Cell Phone Plan Fees

With both Verizon Wireless’ and T-Mobile’s early termination fees in the headlines this year, advocacy group Consumer Action has outlined four tips to help spot and avoid ETFs in the event you want to dump your wireless carrier for a prepaid plan:

  1. Determine if you are even in the ETF “penalty box.” Many consumers are poorly informed about whether or not they face a penalty for switching cell phone services. A March 2009 Opinion Research Center survey found that two out of five Americans (40 percent) do not know what penalty they would pay if they canceled their cell phone service. While this confusion extends to 60 percent of consumers aged 65 or older, it also includes 46 percent of those aged 45-54 and 49 percent of those aged 55-64. Not sure if you face an ETF? Get on the phone with your cell phone company and find out what penalty (if any) you would face for switching providers. If you’ve had your cell phone and current plan for two years or more, you can safely assume that you are no longer in the penalty box on ETFs.
  2. Do the math on your cell phone penalty. Don’t just take a penalty at face value if it is in the range of $150-$200. If you are now paying $90 a month for basic cell phone service and switch to a cheaper cell phone service – such as a prepaid plan offering $45 for unlimited minutes and texting – you can “pay off” a $150 penalty in just three months. After that point, you would be saving $45 a month compared to your current plan.
  3. If you are out of the penalty phase and want to stay out of it, avoid getting lured back into it by your cell phone provider. The ORC survey from March 2009 found that nearly half (48 percent) of cell phone consumers either were already are at the end of their penalty period (7 percent) or in its last 12 months (41 percent). Don’t be surprised if, as your ETF penalty period draws to a close, your cell phone provider offers a new phone or more minutes in order for you to start the ETF penalty period all over again!
  4. If you want to switch, keep an eye out for your cell provider changing the terms of the contract. Under certain circumstances, major changes by your cell provider to the terms of the contract you signed can be used as the basis for escaping early termination fees. If you are interested in switching cell phone providers and want to avoid an ETF, be on high alert for bill inserts, emails and phone calls that spell out new terms and ask for you to agree to them. Keep in mind that your cell phone provider doesn’t want you to use the contract term changes as a basis for switching, so this may all be buried in the fine print.

What if none of these four things works for you?

For more adventurous consumers who are prepared to go farther to avoid a cell phone ETF penalty, it may make sense to explore a third-party matching service, such as Trade My Cellular, Cell Swapper and Cell Trade USA. These organizations charge up to $20 to the person giving up their contract to find someone willing to assume the contract. If you explore this right, be prepared to pay up to $20 to get started and then possibly the first month of the new person’s basic cell service as an inducement to get them to take the contract off your hands. That is still going to be cheaper than paying $175 or more.

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