How to Get Out of Your Smartphone Contract Without Penalties

How to escape your phone contract without paying a dime

By Simon Hill November 9, 2014

How to escape your phone contract — Image used with permission by copyright holder

Are you desperate to get a new phone or switch your service, but reluctant to do so because you know you’ll get slammed with a big, fat early termination fee? We’ve all been there. If you’re looking for a way out without penalties, we might be able to help.

Carriers offer us the latest smartphones for a small upfront fee or for free because it encourages us to sign up for two-year contracts. Contracts lock our custom in and ensure the carriers get their money back (and then some) for the subsidized device. It makes us less likely to switch carriers, but just to make sure we don’t, they apply ETFs which can be hundreds of dollars.

To help you out, we’ve put together a guide of different methods you can try to get out of your contract without an ETF.

Find out how much you owe

You need to refer to your contract to find out what the damage is, but the ETFs for smartphones are generally the same. The cost of your ETF will start to fall by a specific amount for each month you pay, but sometimes it takes a few months before reductions kick in.

For AT&T, you’ll pay $325 minus $10 for each month of the contract you’ve completed and paid for.
For Verizon, you’ll pay $350 minus $10 for each completed month.
For Sprint, you’ll pay $350 for the first 6 months then it drops by $10 in the seventh month and $20 a month after that, down to a minimum of $100.

T-Mobile no longer locks its users into two-year contracts.

The easy ways out

There are some ways out of a contract without penalty, but they’re not going to help most people.

If you cancel in the first 14 days, then you should be able to walk away without having to pay an ETF. However, you will have to return your device, and you might get slapped with a “restocking fee” unless your device is in its original packaging and unopened. The fee is generally $35.

If you are in the military and get posted somewhere without service for an extended period, then you are protected under the Servicemembers Civil Relief Act and you should be able to terminate the contract or freeze it until you return.

Additionally, if you are moving home to an area that has no coverage on your network, you should be able to negotiate your way out of the ETF.

If you die, then the contract can be canceled.

Slightly harder ways out

Occasionally, the carrier makes a material change to the contract terms, and they have to notify you when they do so. You should have a period within which you can reject the new terms. Usually, continued use of the service is taken as agreement, so you have to be on the ball to spot this when it happens and react accordingly. It’s not going to happen very often, though.

If you can find someone else to take over the contract for you, then the carrier will be fine with it. As long as they get their money, they don’t care who pays. You can use a service like Cell Trade USA ($20 fee) or Cell Swapper ($19 or $25 fee) to help you find someone willing to take on your contract. There’s also Trade My Cellular, which seems to be completely free right now.

If you switch carriers, you might be able to claim your ETF fees from the new carrier. Sprint offers up to $350 per line via a Visa Prepaid Card, and T-Mobile will reimburse you when you send them your final bill with ETF charges on it. Just make sure you understand the terms and conditions of the deal.

Next page: Three more ways to avoid ETFs

The hard way out

If your level of service is poor, then you might be able to find a way out without penalties, but carriers deliberately avoid guaranteeing a specific level of service for exactly this reason. If you have a few dropped calls, or you can’t get the latest LTE, they are not going to fold and waive the ETF.

You’ll need to document the process and make sure you complain repeatedly. You may even want to file a complaint with the FTC. The chances are that your carrier will try to deal with your problem and find a way to improve the signal, but you might be able to secure a discount or an early termination without penalty if your service has been genuinely bad.

The big carriers have arbitration clauses in their contracts, which prevent you from filing a class action lawsuit. If you have a legitimate complaint and you can’t get the carrier to acknowledge it, then you can go to arbitration or try suing in small claims court. Matt Spaccarelli famously sued AT&T in a small claims court about the carrier’s throttling of his “unlimited” service and won, but he only got $850 and AT&T did not change their practices. You can read about it at his website.

You’re not going to win anything going down this route unless you have a real complaint that you can verify with evidence, so think about it carefully.

Time to negotiate

Phone your carrier, explain that you want out of the contract, and ask them if there’s any way they can help. They’ll often waive fees or offer discounts if you are willing to sign up for a new contract. You should be able to cut your level of service and reduce the monthly bill if you need to. It is also possible to suspend contracts in some circumstances, but that will only buy you some time.

Threatening to leave is your biggest bargaining chip, especially if you’re paying a lot, and you’ve made the payment every month. If you’re going to try the haggling route, then make sure you do your homework first. You can point to better offers at competitors or introductory offers for new customers to try and encourage them to offer you a deal. Retentions are authorized to offer deals, but there’s a discretionary element to it, so be as friendly as possible.

The advice we offered in Be shrewd or get screwed: How to haggle your way to a lower cable or internet bill applies here as well.

The end of the road

If none of these suggestions work for you, then you may be stuck paying the ETF, or accept that it’s not worth switching right now and wait until nearer to the end of your contract. If you’re going to switch and get a new phone, then you can offset the cost by selling your old handset. There are also services like Rent My SIM that allow you to rent out your SIM to travelers for a percentage of the profits, but proceed with caution because it’s probably against the terms of your contract.

In the future, make sure you read the fine print before you sign up for another contract and weigh carefully whether it will actually save you or cost you money in the long term.