Your cellphone contract is most commonly called a “Terms of Service Agreement” or “Terms and Conditions of Service.” It is a legally binding agreement between you and your cellphone company covering charges, billing, and other aspects of service. The phone company will operate under the assumption that you have read, understood and agreed to the terms of the contract, so, as with all contracts, read the contract before you sign it. Ask for a copy for your records.

It is typical for a cellphone service provider to require an extended-term contract, typically for 12 to 24 months, in return for a discount on the purchase of your phone. If you decide to switch to a different provider during that period, you may be required to pay an early termination fee. If you purchased your phone and service through a third-party retailer, you may have an additional Terms and Conditions Agreement, carrying an additional cancellation penalty should you terminate the contract before the term is up. Again, read all of the materials presented to you before you sign anything, including any brochures or other marketing materials, as they may be included in the contract terms.

Written contracts are binding. Therefore, it overrides any kind of verbal representation or promise made to you by the sales person trying to sell you a new phone or new plan. It is important that you read the contract to insure you know what you are paying for and what obligations you have.

Tips:

• Compare service plans from different companies before signing a contract.
• Do your research comparing the length of contracts, the price of an early termination fee, coverage and plans.
• Clarify any terms in the contract you do not understand before signing.
• If there is any sort of promotional or introductory price on your phone or any service included in your cell phone service contract, make sure you know when this time frame expires and that you know how much your bill will increase afterward.
• Know how and when you will be billed. Many consumers opt to have their bill paid from an automatic bank withdrawal. Be sure you know when to expect it.
• Keep a copy of the terms and conditions with you for the duration of your contract.
• Know when your contract expires. Beware of any offer you receive from your cell phone provider during the term of the contract. While the offer may be attractive, it might include an additional contract extension. Accept the offer only if you agree that any contract extension is one that will benefit you.

Early Termination Fees

Consumers commonly see advertisements for basic cell phones that cost $0.50 and smart phones for almost as little as $49.99. Phone companies are able to sell expensive equipment at such reduced prices by requiring consumers to sign contracts for service. If you purchase one of these discounted phones, you will be required to sign a contract with the service provider promising to use their service for a specific length of time, usually one to two years. If you terminate your cell phone contract prior to the end of the contract term, you will likely be charged an Early Termination Fee (ETF) or an Early Cancellation Fee (ECF). ETFs can reach into the hundreds of dollars depending upon your service provider and the type of phone you purchased.

Tips:

• Ask about the cost of the ETF prior to signing any contract.
• Research the reputation and service of the service provider to ensure that their service will meet your mobile phone needs.
• Be prepared to commit to the service provider for one to two years.
• Ask the service provider if they have a policy of pro-rating ETFs. Pro-rating refers to reducing the amount of the ETF based upon the length of time remaining in the contract term. Not every service provider allows pro-rating of ETFs.
• Ask the service provider if they allow risk-free trials. Some providers allow customers to take their new phone for a “test drive” of 14 to 30 days to review the phone and the services provided. Keep in mind that although you may avoid an ETF with a trial period, other fees may apply.

To avoid ETFs, purchase the phone at its full retail price and request month-to-month service from your preferred provider.