We talk a lot about early-termination fees, or ETFs, here at CNET because we have a love/hate relationship with signing a two-year service agreement (or three years if you're in countries like Canada). On the one hand, who doesn't love being able to own a $500 or $600 smartphone for $200, $50, or even a penny? You just can't swing that in the unlocked phone market.
On the other hand, few people enjoy being tied to a carrier, and to their carrier's phone selection, over the course of two years or longer. What if you change your mind about the service quality, what if your dream phone just came out on another carrier -- what if? Once you sign your name on the dotted line, there's little you can do to avoid an up-to-$350 fee to jump ship.
ETFs may seem evil when you're trying to break free of a contract (remember, though, you signed it), but for carriers, they're a practical business measure for recouping costs. After all, carriers are the ones buying phones from Apple, Samsung, HTC, Motorola, and so on, which they then sell to you at cut rate along with your full-price service. Charging you an ETF helps recover carriers' upfront phone costs should you want or need to break the contract before your time is up.
With that in mind, here are some facts and tips you should tuck away for a rainy day.
0. ETFs deflate
Your ETF may cost somewhere near $350 when you just buy the phone, but carriers like AT&T, Verizon, Sprint, and T-Mobile will reduce your ETF a little each month, usually by $10 per billing cycle.
1. Keep an eye on that grace period
If you're new to a carrier and just bought a new phone you're unsure of, you'll usually have at least 14 days (or up to a month) to return it without penalty. The same applies to purchases from big-box stores like Best Buy. So if you're having second thoughts about that phone; don't wait to act.
2. A silver bullet you don't want
There is one ironclad way to get out of a contract without paying for your ETF: expire. I really, really don't recommend it (or faking your own death).
3. Report it
Carriers clearly want to offer you a great network experience, so you'll stick with their service rather than bail. If your service degrades over the course of your contract (or "materially changes") then you might be eligible for recourse like a signal booster or bill credit, or in extreme situations, a pronounced service drop-off might warrant releasing you from your obligations.
This snippet from Verizon's contract pretty much sums it up for all the post-paid carriers:
If you're a Postpay customer and a change to your Plan or this agreement has a material adverse effect on you, you can cancel the line of Service that has been affected within 60 days of receiving the notice with no Early Termination Fee if we fail to negate the change after you notify us of your objection to it.
In some cases, you may need to reach out in writing.
4. Freeze it
If you're more concerned about pausing service rather than abandoning it, you can temporarily freeze your account. Each of the Big Four carriers participates in seasonal suspension, usually without billing (your ETF won't budge) or with billing (you'll pay every month not to use your phone, but you'll work off your ETF cap). It's more ideal for long vacations (Verizon's offer tops out at 180 days), and it usually extends to people who have paid their bills in full.
For instance, Sprint charges $8.99 per month for up to six consecutive months, and AT&T charges $10 per month to suspend the account, and T-Mobile will hold your phone number and rate plan for six months without penalty.
5. Swap your service
One of the theoretically simplest, cheapest, and most clever ways to avoid breaking your contract is to pass it off to somebody else. You'll have to go through some paperwork and phone calls with customer service, but if you can find someone to pay out your contract for you, you can avoid the fee and still be free.
Carriers won't charge you to swap the deed, called a transfer of responsibility, but finding a replacement can be tricky. There's always Craigslist or eBay, but a surer solution is to go through a service like CelltradeUSA. You can think of the Web site and others like it as a brokerage for buying up and selling contracts. The business will collect a $20 fee to move ahead with any swaps, but it will walk you through the legal steps. "Sellers" often offer the phone and accessories at cut rates, or as part of the deal.
I have not personally tried any services like CelltradeUSA or any others, but I did spend some time looking into the business a while ago, and found positive writeups. (Disclosure: The Celltrade service is powered by CNET cell phone reviews.)
6. When all else fails, escalate
I want to idle on hold for a customer service representative as much as the next person, but I'd rather invest a half hour of my day to settle an issue or clear up confusion than suffer in silence. In my experience, asking to speak to a supervisor can open new doors or supply critical additional information. Being a squeaky wheel--but a polite one--often pays off.
7. Take it to Twitter
In addition, carriers have become extremely responsive to Twitter and Facebook queries, and often have a customer care account in addition to their regular online persona. For carriers, social media offers a chance to interact with -- and with luck, assuage -- disgruntled subscribers on a more personal level.
8. Arbitration, your last resort
Consulting a lawyer is another angle I wouldn't encourage outside of rare, . About a year ago, the Supreme Court decided that carriers could shield themselves from class action suits (full PDF) by offering arbitration instead. When you sign a contract, you waive the right to levy a class action suit. Yet, if you do think that you're unlawfully being charged, you could approach a lawyer to sue in small claims on your own, or approach the carrier to arbitrate a case. The carrier generally shoulders arbitration costs.