When you sign up for a cell phone plan, you are bound by a contract depending on the type of phone you get. Providers attract customers by selling phones at a cheaper price than if they were to buy it directly from the manufacturer. Cell phone providers then make an agreement with the customer to keep the cell phone service for a certain period of time. Contracts can range from one- or two-years.
Mobile carriers charge an early termination fee for contracts that are cancelled before their expiration date. This discourages customers from switching to another carrier and remaining with the provider that they enter into a contract with. However, some providers like AT&T have a policy wherein if the cellphone is returned within 30 days from the beginning of the contract in like new condition, the fee may be waived.
Cell phone providers and manufacturers create agreements that will allow providers to sell phones at a lower price, provided that consumers sign a one- or two-year contract. If the consumer terminates his plan earlier than the contract stipulates, cell phone providers may lose profit. Providers may charge an early termination fee of £130 per line for cancelling the contract. This is because mobile carriers try to recoup the cost of subsidising the phones that it provides its customers at cheaper cost.
Due to customer complaints, providers have eased the early termination fees, but you may still need to pay some amount for terminating your contract. If you don't think you'll be able to keep a cell phone plan for a year or two, you may want to look into prepaid plans, which don't require customers to enter into a contract with the cell phone service provider.
In 2008, a court in California ruled that early termination fees are against the law. This was a response to a class action lawsuit that was made against Sprint Nextel for charging hefty early termination fees. Providers like AT&T and Verizon have responded, creating a policy where early termination fees will be prorated.
You can avoid fees by transferring the plan to someone who will be able to keep the contract for the remaining term. Companies such as Celltradeusa.com connects consumers who want to get out of their contracts with those who are looking to get into a contract. Sellers pay a £12.90 service fee, while buyers can use the service for free.
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