One of the ways traditional mobile service providers attempt to ensure you don’t go with a competitive offering is by locking you into a contract.
When a telco offers a "free" phone in exchange for signing a two-year or longer contract, you are still paying for the phone... you just don’t see it. The true cost of subsidized or “free" phones is buried and offset by the cost of service, contract exit fees and the like.
Here in North America, subsidies are the rule and with subsidies come contracts.
There are several ways you can get out of a mobile service contract if you’ve already signed on the dotted line. We’ve covered a few ideas in our How to Ditch Your Mobile Contract help article. The easiest way though is to simply pay the exit fee for your contract. Once you pay the exit fee, you’re free and clear to go month to month or to switch providers.
Early Termination Fees by Carrier
Different carriers use different metrics to figure out what you’ll owe if you decide to break the contract. We’ve compiled data covering the top three mobile service providers to help you figure it out.
Cost to break an AT&T contract
AT&T breaks down early termination fees differently for smartphones as compared with feature phones. This is a common practice.
For the former, customers pay an early termination fee of $325 minus $10 for each month of the contract (“Service Commitment") you’ve fulfilled.
If you got a subsidized iPhone, signed a two year contract and fulfilled 18 full months of service, you’d pay $145.
For feature phones and any device not considered an smartphone or netbook, as per AT&Ts Early Termination Fee page, you’ll pay $150 less $4 for each full month of service under the agreement.
Verizon charges $350 for early contract termination assuming you have a smartphone, tablet or netbook purchased under subsidy. Check out the full list of what are considered advanced devices to see if your phone is on the list. Feature phones and some data devices have a $175 early termination fee.
Advanced device and feature phone early termination fees are prorated against completed months of service. $10 per month of the contract fulfilled for advanced devices and $5 per month fulfilled on other devices.
Sprint levies a $350 early exit fee for smartphones, tablets, netbooks and notebooks. It also prorates against how many months of the contract have been fulfilled. Sprint prorates at $20 per month fulfilled for smartphones.
Using the same iPhone with 18 months of the two-year contract fulfilled example, you’d be paying $120 in early termination fees in order to get out of the contract six months early.
Once the prorated early termination fee hits $100, it stops and remains at that level for the duration of the contract.
For feature phones and other devices that don’t fall into the categories of smartphone, tablet, netbook or notebook, a $200 termination fee is applied. Each fulfilled month of service is prorated at $10. Once the early termination fee hits $50, proration stops.
All of the above contract termination fees assume you have a device that doesn’t fall under the carrier’s return policy. If your device has been activated for less than two weeks, most carriers will let you break contract and return the device without penalty. Naturally, you’ll need to return the phone in new condition with all the accessories present to get a refund.