Cell phones are a necessity for many American families and cell phone contracts are often expensive and difficult to cancel. If you look around the internet, you will read countless stories about consumers getting the short-end of the stick from telecom companies. Whether you moved to a new home, city or state with no service, lost your job and can’t afford the monthly premiums, or simply hate the coverage you are getting, chances are, you don’t want to pay the early termination fees to get out of your contract and are looking for a cheaper alternative.
Because these early termination fees can be a huge hassle and cell phone companies renew your contract for every little plan change or phone upgrade, some people opt for no contract mobile services, also known as “Pay As You Go” or prepaid plans. Some of the largest “No Contract” carriers include T-Mobile (who offers contract and no-contract), Boost Mobile, Cricket, Virgin Mobile, MetroPCS, and TracFone.
While prepaid services are flexible, they may cost more than a contract plan. Choosing the best cell phone plan and company the first time around takes a little research, and can save you a lot of time and money in the future by not having to make countless calls to customer service, try to cancel a contract, pay early termination fees or suffer from bad service coverage.
The Advantages of Cell Contracts
Most cell phone companies, such as AT&T, Verizon, T-Mobile, and Sprint, provide free or deeply discounted phones when you sign up for a 2 year contract. Customers are then allowed to upgrade their phones each time they renew their contract for another 2 years. Family plans allow you to include several lines on a plan at a lower cost than each family member buying their own service. Although the number of monthly minutes is combined and shared, contracts usually allow users to make in-network calls for free, as well as select between 5 and 10 numbers to call without being charged minutes. Unlimited text messaging is included in most contracts, but there is an additional charge for data plans.
No Contract Phones
No-contract or unlocked phones are easier to get than contract phones – just buy the phone and pay the first month’s service. Unlimited plans are available for a flat monthly rate, but those who do not use their phone often can save money by choosing a limited plan that charges for call minutes, text messaging and data services based on usage. There is no penalty for cancelling a no-contract service and if the user fails to pay the bill, the service is cut off but may be renewed within 90 days. There are no monetary penalties for termination of pay-as-you-go plans.
Contract vs. No Contract Cell Phones
The initial cost of contract mobile plans and phones is less than the price of no-contract ones. Contracts are usually the cheaper option for families who need multiple phone lines to keep everyone in touch. Providers do run a credit check and people with poor credit may not qualify for a contract. No-contract plans do not do credit checks. Contract services have substantial financial penalties for cancellation, but consumers who know their contracts may be able to avoid the penalties by invoking clauses that allow early termination.
How To Get Out of Your Cell Phone Contract
You will likely read dozens of articles promising ways to get you out of your AT&T, Verizon, Sprint, or T-Mobile contract without paying termination fees. Read any of the comments associated with those articles and you will quickly realize that you’ll be very lucky to get out of your mobile contract free, even if you demonstrate a real or dire need. Cancelling a contract without an ETF of $200 or $300 per line is the exception, not the rule, but it never hurts to try.
1. Find A Sympathetic Customer Service Representative
Talking to the right person can sometimes make all the difference. It is unfortunate, but the level of customer service throughout a company is inconsistent. Some employees know the policies, rules and regulations better than others and use their power to actually offer a good user experience. For example, I’ve called AT&T for my home DSL service every month this year to get a promotional credit applied to my bill. At the end of every call, I was promised this would be taken care of for the future, and every month after, the bill showed the incorrect balance. Finally, I reached a sweet woman who fixed the entire issue for me once and for all.
Just because it is highly unlikely that you’ll get a sympathetic employee who will use their power for good, doesn’t mean it will never happen. Start by being respectful and nice, after all, this person is not the reason you are upset. Explain your problem and try to evoke some compassion. They will go through their scripted messages to resolve your issue, and when none of them satisfy your problem, innocently suggest getting out of the contract without paying any fees. If all else fails, ask for a manager. Be willing to compromise – if they offer you a discounted early termination charge, take it. It will likely be the best deal you can get.
2. Contract Changes
All service providers reserve the right to make specific changes in their contracts like raising the rate for overtime minutes or text messaging. The provider must give users a 30-day notice of the changes and consumers have the right to cancel their contract within 14 days of notification of the changes. If a free phone was provided as part of the contract, the user may have to pay either the full cost or a discounted charge for the phone, but there are no termination penalties for cancelling due to contract changes. If you are lucky and want to change carriers soon after a seldom-announced contract change, you can try to invoke this as your reason, but be prepared to hear arguments to keep you in your current plan.
3. No Home Cell Services
One way to get out of a contract with your provider is to prove that there this no cell service at your home or office. The cell companies have detailed maps showing their service areas, which means the customer must be able to prove they do not have service. Customers who have relocated to an area with no service can try to cancel their contracts based on this reason, but one retort we keep hearing from customer service representatives is “I’m sorry, but we didn’t force you to move to an area with no coverage”. Be sure to read the no service clause (if you have one) of any cell phone contract before signing with a mobile company. In fact, we recommend looking at your entire contract to find any loopholes you may be able to exploit. Treat this like a business meeting, and come in prepared with loads of ammunition. As a rule, however, pay as you go providers do not issue refunds for “no home service” complaints.
4. Just Pay The Fee
Don’t think for a second that you can just stop paying your monthly premium or avoid the early termination fee to get out of your contract. You may save a few hundred dollars in the short-term, but the long-term affects to your credit score will be detrimental, and may cost you thousands of dollars in additional interest rate payments on your next home or car loan.
For a smartphone, you can expect to pay up to $350 for each line – T-Mobile’s highest rate is $200 while AT&T’s is $325. Instead of the headache of customer service representatives putting you on hold only to hang up on you in 5 minutes, or wasting your time repeating your situation or complaint to multiple reps to no avail, pay the fee and get out. Afterwards, you’ll have no further obligation to the company and you can’t get sucked in again.
5. Roaming Clauses
Providers charge roaming fees when users make calls from locations other than their home area. A user may be able to cancel his contract if more than 50% of the calls made in a three month period are subject to roaming. This varies between mobile providers so customers will have to check their contracts to find out if the roaming clause applies. Roaming costs the service provider money since they have to pay for the use of other providers’ networks and equipment. Roaming charges can apply to domestic and international cell phone use too.
6. Trade Your Contract
If you can find another person who qualifies for a cell contract and is willing to take over the financial responsibility, you can sign your contract over to a different user. If you do not know anyone, there are online services, such as CellSwapper, that match people who want to change their calling plans. The websites only match people who want to change providers, so they will not work if you want to cancel cell service completely or switch to a no-contract plan.
7. Sue Them
If you try to cancel your contract with cause and the mobile company still charges termination fees, you can file a lawsuit in small claims court. Small claims can be filed without a lawyer, although in most jurisdictions, there is a court fee of $30 for filing lawsuits of less than $1,500. In some cases, plaintiffs win by default since it costs more for the company to send a lawyer to defend the claim than it does to pay it. If you win the case, the company will have to refund the termination fee but they may or may not be held responsible for legal and court costs.
Cell Phone Contracts and Your Credit
While making timely payments on a phone contract will not improve credit scores significantly, failure to pay the contract can have a negative impact on your credit. Cell phone companies do report defaults on contracts to credit bureaus and may place delinquent accounts with collection services. If job loss or illness causes financial problems that force early termination of a cell contract, it may be possible to negotiate installment payments of termination fees or to pay a reduced fee. Be careful to not ruin your credit score or history over a couple hundred dollars.
While cell phone contracts provide advantages to most consumers, getting out of a contract can be a hassle. Before choosing a cell phone service and carrier, it is a good idea to compare the contracts, plans and coverage areas of different companies to get the most for your money. No contract phones are a good option if your mobile use is limited. The lowest price may not be your best deal so consider how you use your phone before selecting a calling plan.