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Home » Budgeting, Technology

Ranking the 4 Major Wireless Carriers Early Termination Fees (& How to Avoid them)

Last updated by on 17 Comments

Back when I was writing my post on the worst return policies, I almost lumped in every contractual wireless service provider due to their pesky early termination fee penalties that are enforced in order to lock you into false brand loyalty. However, EVERY ONE of the four national carriers make early termination fees a central part of their contractual agreements.

I understand the business reason behind early termination fees. However, if my service or device is awful and you’re a customer focused company, you will try to make things right and not add insult to injury by stinging me with hundreds of dollars in early termination fees. For that reason (and lower costs elsewhere), I decided a few years ago to make the move to prepaid, no-contract cell plans. A few of the BIG 4 carriers offer prepaid plans now, but the cost is usually prohibitively high (either by service cost or device) to entice you into jumping into a contract.

early-termination-fees

What is an Early Termination Fee?

It is quite possible that you have never had to pay an early termination fee. If you have, you know how painful they are. If you have not, they essentially serve the dual purpose of:

  1. Allowing the service provider to recoup any discounts they may have given you on equipment so that they don’t lose money on any customer.
  2. Acting as a barrier of exit if you find a better offer elsewhere or simply want to end your service before your contract is up.

Often times, when you receive a discounted phone for being a loyal customer, your contractual agreement renews, and most do this without mention.

I’ll rank order the four national cellular service providers early termination fee policies from best to worst, and then offer up a few alternatives if you want to avoid them altogether.

#4: Sprint Early Termination Fees

Sprint’s early termination fee scales down by $10/month after your first 4 months, in line with this chart. It is also the only one of the four that does not charge a restocking fee. The fairness of early termination fee policies outside of Sprint’s is apparent, as you will see. The scale-down starts at:

  • $350 for smartphones
  • $200 for non-advanced devices (dumbphones)

# of days to cancel without early termination fee: Sprint gives you 14 days to return without an early termination fee.

Restocking Fee? None

#3: T-Mobile Early Termination Fees

T-Mobile scales downward. The $200 is low compared to AT&T and Verizon, but it is a flat $200 for all the months up until you only have 6 months left! So you could technically be 17 months into a two-year contract and still have to pay $200 to terminate, which is fairly ridiculous. Another ding against T-Mobile is that they are the only one of the four to give only 14 days (vs. 30) to cancel without the termination fee (excluding California). Also, there restocking fee warning is very ambiguous.

For all phones:

  • $200 if you terminate with over 180 days remaining on your contract.
  • $100 if between 91 to 180 days remaining on your contract.
  • $50 if between 31 and 91 days remaining on your contract.
  • The lesser of $50 or your monthly recurring charges if 30 days or less remaining on your contract.

# of days to cancel without early termination fee: T-Mobile gives you 14 days from your activation to cancel without having to pay early termination fees.

Restocking Fee? You ‘may be’ hit with a restocking fee, but T-Mobile’s T’s & C’s don’t specify what it might be.

#2: AT&T Early Termination Fees

AT&T brings their ‘A-Game’ by boosting termination fees up to $325. They also have a restocking fee for all devices.

  • Smartphones: $325 (minus $10/mo. you had service)
  • Dumbphones: $150 (minus $4/mo. you had service).

# of days to cancel without early termination fee: AT&T gives you 14 days to cancel without incurring an early termination fee.

Restocking Fee? $35 restocking fee, if made within 14 days.

#1: Verizon Early Termination Fee

Verizon is the worst of the worst with the highest early termination fees, ZERO pro-ration based on how many months of service you’ve already paid for, and a restocking fee to boot. Customer beware.

  • $350 for smartphones
  • $175 for dumbphones

# of days to cancel without early termination fee: Verizon gives you 14 days from activation to cancel without having to pay early termination fees.

Restocking Fee? $35 for phones or $70 for netbooks or tablets.

How to Avoid Early Termination Fees

If you want to avoid the early termination fees, you have to go with a no-contract, prepaid provider. You’ve heard me talk about a few of these before, but they are worth mentioning again. The problem with some of these plans is that if you do want a top of the line device, you are going to have a significant up-front cost to buy that phone, as they are usually not discounted. Factor in the cost of the phones into the monthly service costs to get a true comparison to a contractual offer. Older, or less advanced models, on the other hand, are usually dirt cheap.

  • Net10: Zero ‘smart phone’ offerings, but many phones come with free minutes, which essentially make the phone free.
  • Tracfone: Very similar to Net10, and even cheaper.
  • Virgin Mobile Beyond Talk: Smartphone offerings (although usually not the top of the line, latest devices). High price of entry.
  • StraightTalk: Offers no-contract monthly unlimited plans.
  • MetroPCS: Nationwide network, claims to be launching 4G.
  • Boost Mobile: No contract and prepaid offerings.
  • ATT GoPhone: No contract, some nice phone offerings, but high price. Monthly plans are pricey.
  • TMobile: Offers both prepaid w/refill and monthly plans with no contract.

Early Termination Fee Discussion:

  • I’ve never heard of an example of someone getting their early termination fee waived unless it was within the introductory month. If you were able to avoid early termination fees, let us know how!
  • Have you abandoned contractual agreements because of early termination fees?

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About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


17 Comments »
  • Jesse says:

    G.E., as you stated, the termination fees are largely driven by the fact that the carrier heavily subsidizes the price of our phones. From a business standpoint, they have to charge these fees. And even with the fee, carriers often still lose money when people leave.

    The fact is, this is largely a market-driven phenomenon. Consumers are asking for cheap smart phones. Look at the failure of the Nexus 1, consumers just don’t want to pay the heavy upfront cost of buying a handset even if that gives them freedom to move networks. And they especially don’t like doing it when there’s new device out in a matter of months.

    Maybe someday we will see the death of the contract fee, but not until consumers are willing to pony up more money for their phones or decide to break the annual/bi-annual upgrade rotation, contracts are here to stay. However, with the growth of device functionality, the cell phone market may end up looking more like the PC market where you buy a machine that you keep for a few years and simply upgrade the software when new features are released.

    • G.E. Miller says:

      @ Jesse – Why should it be that way though? If you are the best carrier out there – good phones, good service, strong customer focus – why would people leave? Your phone has already been rendered useless on other networks so they aren’t going to take the phone and run. Why won’t the carriers consider the subsidization as a cost of acquisition? Many banks will pay you hundreds to open a new checking account – and they make far less off their customers than wireless carriers. It’s a monopolistic behavior in a highly competitive market, which does not make sense. Since they all do it, we’re all SOL, unless you decide to go with a no contract alternative.

  • Jesse says:

    Hi GE,

    If you can’t tell, I work in the telecom marketing business. The facts are that consumers switching carriers largely for handsets, not for customer service. They tend to stay for strong customer service, but are still willing to move to a different network if it provides the handset they are looking for. The iPhone is a great example. People don’t care if AT&T is not good, they just want the iPhone, and they don’t want to pay a lot of money for it up front. The original iPhone was barely subsidized, but sales didn’t take off until Apple dropped the price with a subsidy. Consumers then had to pay through higher plan costs and higher contract exit fees.

    The carriers actually do consider the subsidy a cost of acquisition, and barely make their money back on the subsidies before the customer either leaves or upgrade their phone, incurring another subsidy. What the carriers would prefer is for you to buy one handset, never upgrade it, and stay with them for life. However, if your customer is simply going to flee your network after a year or two because they want a specific handset/device, it’s not good business to fork over upwards of $500 to acquire a customer.

    I know in the past, banks paying people to open checking accounts was a common practice, but that has become increasingly less common after the recession and new banking regulations. I think you would be hard pressed to find a bank these days that is willing to pay hundreds of dollars to acquire a customer, unless that customer had a very large sum of money. Plus, banks have a lot more “sticky” products that they use to keep customers from switching. Things like automatic bill pay and direct deposit are examples, both are a pain to switch to another bank. I’m willing to be customer churn at banks is a much lower percentage than wireless, with much much longer overall customer life cycles, probably often in the 10 year range.

    I think the carriers would love to do away with the subsidy model, but are worried that fickle consumers will not be willing to pay the true price of the handset. As long as one carrier is subsidizing their phones, customers will flock to that carrier for the cheaper devices, even if they have to pay a higher monthly fee. This has happened in the market place time and again. Again, as device improve and handset turnover slows, I think we’ll see carriers move away from this model in the direction of being strictly service provides, similar to cable companies and internet provides that don’t try to sell you subsidized computers or TVs.

  • Joe says:

    My wife and I just had to deal with this a few months ago. We discovered that we could save $80 per month if we dropped my Sprint cell service and I piggybacked onto her existing Verizon account. It was well worth the early termination fee since we were able to recoup that in just a few months through the money we saved.

  • casey says:

    I have had my early termination fees waived by T Mobile about a year or two ago. The reason I got out of my contract without paying the fee was because of persistence and because they made a change in the contract terms. I received a notice in the mail about contract changes and they raised a charge by like 5 cents a minute. I told them I didn’t agree to the new terms…

  • Taiwan Brown says:

    Verizon only gives you 14 days now!

  • Sue J says:

    I have had such problems with phones that don’t work that I would be more than willing to pay directly to a company willing to make one that did.

  • Jenny G. says:

    I have heard that you have a trial period (depending on the carrier, i.e. AT&T 30 days; Verizon 14 days?) that you do not have to pay the early termination fee (ETF) if you cancel your new contract before the billing date. Is it true? Can you really be able to get away from the plan without paying the ETF?

    I think it is according to this following statement.

    “30-DAY CANCELLATION PERIOD/TERMINATION
    You may terminate this Agreement within thirty (30) days after activating service without paying an Early Termination Fee. You will pay for service fees and charges incurred through the termination date, but AT&T will refund your activation fee, if any, if you terminate within three (3) days of activating the service. Also, you may have to return any handsets and accessories purchased with this Agreement. If you terminate after the 30th day but before expiration of the Agreement’s Service Commitment, you will pay AT&T an Early Termination Fee for each wireless telephone number associated with the service. Either party may terminate this Agreement at any time after your Service Commitment ends with thirty (30) days notice to the other party. We may terminate this Agreement at any time without notice if we cease to provide service in your area. We may interrupt or terminate your service without notice for any conduct that we believe violates this Agreement or any terms and conditions of your rate plan, or if you behave in an abusive, derogatory, or similarly unreasonable manner with any of our representatives, or if we discover that you are under age, or if you fail to make all required payments when due, or if we have reasonable cause to believe that your Equipment is being used for an unlawful purpose or in a way that may adversely affect our service, or if you provided inaccurate credit information or we believe your credit has deteriorated and you refuse to pay any requested advance payment or deposit.”

  • Jenny G. says:

    I am sorry, the previous quote about the 30-day cancellation period/termination was not updated.

    Following is the newest one, but the overall context is similar.

    “Service Cancellation & Early Termination Fee
    Call the number on your invoice/receipt to cancel your service. You may cancel service within 30 days from the activation date to avoid the applicable early termination fee (the “Early Termination Fee” or “ETF”). If your Service Commitment includes the purchase of certain specified Equipment on or after June 1, 2010, the Early Termination Fee will be $325 minus $10 for each full month of your Service Commitment that you complete. (For a complete list of the specified Equipment, check http://www.att.com/equipmentETF). Otherwise, your Early Termination Fee will be $150 minus $4 for each full month of your Service Commitment that you complete. You will be responsible for all applicable usage fees, prorated access charges, taxes, surcharges or other charges through the termination date. AT&T will refund your activation fee, if any, if service is terminated within 3 days of activation.

    You may have to return any handsets and accessories purchased with the service before your account will be cancelled. If you are allowed to cancel service within the 30 day return period, but do not return the equipment within the return period, AT&T may charge you an amount equal to or up to the full retail price of the equipment.

    If you paid a security deposit, it will take 1 to 2 billing cycles to process the return of the security deposit. The charges for service used on the account before the service termination date will be applied against the security deposit.”

    The reason I am concern about this is that I am considering to buy an iPhone4 to use while I am here (in the States) as a student, but I expect to finish my program the next semester. I am afraid that I will have to pay for ETF by the time I am leaving the country. Any answer or suggestion will help. Thank you.

  • Trisha K. says:

    I have had service with T-Mobile for the last 5 1/2 years and my contract was up at the end of this month but like an idiot, I decided yesterday to let them talk me into upgrading my phones and service plan. Two different representatives told me I had 14 days to cancel if I changed my mind. Last night I decided I was going to cancel and go with AT&T. I called T-Mobile this morning to cancel and was told by a supervisor named Jewel, I would be charged a $200 per line termination fee and that the 14 day termination policy only applied to equipment. I told her per T-Mobile’s website the 14 days was for service and 20 days for equipment-I had to tell her where I found this on the website. She then told me that the 14 days was only for new customers and she was sorry I was misinformed. She told me I was not getting out of the contract without paying the termination charges. I asked for her manager and was told he would call me back. It has been almost7 hours and he hasn’t called me yet. In the meantime I have filed a complaint with the FCC and the Attorney General’s Office.

  • Hal Kelley says:

    I need to get out of my contract I can’t afford to keep it as money is about 1/2 of what it was. i want to convert to pre paid w/at&t on go phone plan. Is there any way to do this.
    Hal

  • Anthon Petty says:

    Also, most contracts have a clause that will let you get out of your contract early if you leave the country for employment. Verizon let me get out of my contract when I accepted a job in Hamburg, Germany in 2007.

  • Greg says:

    Jesse is on the mark when he talks about how most carriers in the U.S. subsidize the cost of the phones they market. I like Europe’s model where people aren’t necessarily bound to a contract; they buy an unlocked phone and can switch carriers at the drop of a hat for any reason and it’s as easy as buying a SIM card from another carrier and using it.

    The caveat here is that you also have to pay the full cost for your phone upfront. Seriously, though, it’s not that bad…Considering that a prepaid or pay-by-the-month plan is usually MUCH cheaper than a conventional plan here in the U.S. (because you’re not, in effect, making monthly payments on the phone too) it’s easy just to finish your existing contract (or bail out and pay the fee), and then go prepaid while banking the savings for a few months…Then buy an unlocked phone of your choice. Nowadays we have a lot of information available where we can do our own research, find the plan and services which fit us best and make an educated decision about what we “need”.

  • Jim says:

    I’ve always had a theory about getting around earlier termination fees related to early cancellation (when poor service is involved) and I’m about to test my idea.

    I signed up for AT&T 10 months ago knowing I had a 1 year contact with an early termination fee (it will be about $50 once I cancel). This is for DSL service by the way. While I had planned all along to simply pay the fee as they were 1/2 the price of the only other company that had lines to my building. My problem is that in 10 months I’ve probably spent 40 hours on the phones with these clowns. As well as a complaint to the BBB; all related to billing issues that recurred month after month.

    All in all I’ve paid what I signed up for but WAY to much hassle. I was lied to when I signed up which was the root of the problem (and signed up for an additional service the operator did not even mention).

    SO, long story short I’m going to fight this $50. My plan:

    Simply refuse to pay. They do not have access to my bank. They do not have access to my credit card. They might ding my credit score? Good thing I’m cash basis with no need for debt. I’ll give them my new phone number and my new address. I’ll toss the collection letters in the garbage for a few weeks then send out my cease and desist letter (got a nice one I wrote to PayPal awhile back, guess I’ll use it again). Should only hear from them again when they are ready to take me to court, which won’t happen over $50, so looks like I’m good?

    Any holes in my plan? I’d love to go to court over it. I’d also love to sign up for AT&T again in a future apartment that they service but I’m already expecting a fight which will make me never use them again.

    I’ll report back in a month or so and see where this has taken me.

  • Anthon says:

    I’m interested Jim. Keep us posted on how things turn out.

  • Jim says:

    My update comes a little earlier than expected. I called AT&T to cancel and was told there was no termination fee for closing my account (maybe they read all the notes on my account?). I’ll even be getting back money because they screwed up my account so much I still have a credit from three months ago.

    So while the customer service sucked along the way, I’m ultimately pleased. Guess I’ll have have to test my idea another time.

  • kat kin says:

    The early termination for ‘subsidizing the fee of the phone is bull’. I have had the same 4 phones with T-Mobile for 4 years, and one of the phones was replaced 3 years ago, all were long ago paid for. All were NON internet capable and the cheapest phones T Mobile had. 17 months ago, I adjusted my ‘family plan’ for increased texting. I just switched to strait talk, and was hit with a $1300 termination fee from T-Mobile. They charged $200 per line, plus taxes and fees even though I’ve been a customer for 4 f’n years with the same OLD phones. The Early Termination fee is higher than what they had publicly posted on the FCC website of $200 PER PLAn. Big difference between line and plan. I’ve spoken with 5 customer service reps, who said that is their policy. If you sign up with T Mobile, be prepared to be held hostage forever if you so much as add texting minutes. I’m forwarding a complaint to the FCC and NOT paying it.

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