Early Termination Fees: 4 Steps for Spotting, Avoiding Costly Fines

Last month, Verizon Wireless surprised the industry by doubling its early termination fee from $175 to $350 on its "advanced devices" (i.e. smartphones).

As if $175 for breaking a two-year cell phone contract wasn't high enough, 88 percent of About.com users responding to my poll on the Verizon Wireless news said "I'm at Verizon and now want to switch" or "I'm not at Verizon and now don't want to be".

The long-controversial early termination fee (ETF) is one way the major cell phone carriers (AT&T, Sprint, T-Mobile and Verizon Wireless) subsidize the cost of your cell phone and convince you to stay on a contract-based plan.

Prepaid wireless, on the other hand, exists to break you free of contracts and early termination fees. Here are four new steps for spotting and avoiding costly fees from Consumer Action, which is a non-profit, membership-based consumer education and advocacy organization.

1. Determine if you're in the ETF "penalty box". Many of us don't know if we'll be hit with an ETF if we switch. Call your carrier and ask. If you've had your plan for two years or more, though, you can safely assume that you're no longer in the ETF penalty box.


2. Do the math on your cell phone penalty. If you're paying $90 a month now and switch to a cheaper cell phone service (such as a prepaid wireless plan for $45), you can "pay off" a $150 penalty in just three months. Thereafter, you would be saving $45 a month as compared to your current plan.


3. If you're out of the ETF penalty phase and want to stay out, don't be lured back in. As your ETF penalty box draws to a close, don't be surprised if your cell phone carrier tries to get you back in through the allure of a new phone or more minutes.


4. If you want to switch, watch for your carrier changing the terms of your contract. Major changes by a carrier to your contract terms can sometimes be used as the basis for escaping an ETF. If you want to switch and avoid an ETF, be on high alert for bill inserts, emails and phone calls that change your terms and ask for your approval.

The ETF at AT&T is currently $175 per phone line. It's $200 at Sprint and T-Mobile per line. Finally, the ETF is prorated at Verizon Wireless so it drops $5 per month and it's either $175 or $350 depending on your style of phone. Learn more about how to affordably cancel your contract.