March 31 2010|11.03 AM UTC

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Five Early Termination Fees You’d Love to Hate

Category: News, WirelessTags:

Contracts and customer agreements often come with pricey cancellation policies. Since getting out can cost you a hefty buck, BillShrink has collected a list of the most expensive things that you want to carefully cancel.

I. Is Air Travel a Rip-off?

According to a Wall Street Journal report, in the first quarter of 2009 American Airlines travelers paid $116 million in change-of-flight and cancellation fees. Also, change-in-flight fees from JetBlue Airways’ customers totaled $32.2 million in this same time period. Current U.S. Department of Transportation regulations and laws allow air carriers to charge cancellation fees to customers, without much restrictions.

How to avoid the airline cancellation fee.

Of course, the easiest way to avoid this fee is to stick to your original travel plans. However, because things often “just come-up,” most of us end of paying hefty fees to move a flight a day or two.

Some travel agencies and third-party airline booking agents will absorb the cost of change-of-flight or cancellation fees. Priceline.com‘s Priceline Negotiator policy claims to eliminate change or cancel fees on the published price of purchases. Consumers should use these agencies with caution however, and be sure to read the fine print to see what fees the agency charges. Finally, ask the airline representative what the carrier’s cancellation policy is prior to purchasing tickets. Factor any change-of-flight or cancellation fees into the estimated cost of your travel, to prepare for the worst case scenario (in which you are forced to charge an exorbitant amount on your credit card, for a flight you never boarded).

II. Cell Phone Early Termination Fees

Here is a look at the four major U.S.-based cell phone service carriers’ early termination fees (ETFs), not necessarily in any ranking order.

Verizon Wireless

You know the “free” phone you received with signing a two year service agreement with Verizon Wireless? If you cancel your service within the first year of activation, you will have to pay for it. Verizon Wireless charges for any free equipment given if the contract is canceled within the first year of activation, unless the equipment is returned. The equipment fee could be up to the present retail value of the device, at time of service cancellation. In addition, this service provider’s ETF can be up to $175 or $350 per line for “advanced devices” – Verizon Wireless’ term for smartphones.

AT&T

The AT&T customer agreement states that an ETF of “$175 applies if service is terminated before the end of the contract term and will be reduced by $5 for each full month toward your minimum term that you complete.” If the phone purchased in conjunction with the service agreement is returned within 30 days, the ETF will be waived. The company said in a statement that “some dealers impose additional fees.” No specific dollar amount for these additional fees was cited.

Sprint Nextel

Sprint also waives ETFs for phones returned within 30 days of purchase. However, a $35 re-stocking charge is applied to all returned purchases from this service provider (refers to all purchases made after April 19, 2009). The amount of the Sprint Nextel ETF is pretty outrageous. An ETF of up to $200 is charged per line (pro-rated for service contracts signed after November 2, 2008).  In other words, a family plan cancelled before the minimum contract term (typically two years) could cost up to $800 in ETFs, plus a $35 re-stocking fee per phone! Sprint Nextel also notes that dealers may charge additional fees.

T-Mobile

As of June of 2008, T-Mobile charges ETFs for all service plans canceled after a 14-day return period, but before the minimum term of service is complete (typically two years). This service provider charges ETFs on a pro-rated scale: $200 if more than 180 days remain on the customer agreement; $100 for 91 to 180 days remaining; $50 for 31 to 90 days remaining; the lesser of $50 or remaining charges within the last 30 days of the contract term. Also, a re-stocking fee per returned cell phone may be applied.

How to Avoid Early Termination Fees

Beware the terms of “authorized dealers.” As three out of four of the major U.S.-based cell phone service providers state, authorized dealers may require additional ETFs.

Read the fine print and know what your carrier’s ETFs are and weigh your options. Ask yourself if you are likely to keep the phone plan for the minimum term of service before you sign the agreement. Also, consider if you plan to remain in the location of service coverage for the minimum term. Most often, a re-location move is what forces customers to terminate their service contracts as the new location is outside of the cell phone provider’s range of service. If the answer to either question above is no, consider a month-to-month contract option or a pre-paid cell phone (again, you’ll want to read the fine print).

Be aware that freedom from your current contract may be forthcoming. The Federal Communications Commission (FCC) is cracking down on wireless carriers for these ridiculous ETFs, in pursuit of setting reasonable standards for the industry. Also, legal battles are pushing wireless carriers into a corner. Consumer friendly changes to ETFs may be just around the corner.

III. The Marriage ETF (a.k.a. Divorce)

Breaching a Marriage Contract

Getting a divorce is, in essence, canceling a marriage contract. In the event of canceling this contract, damages to each spouse is assessed and marital property is divided. The term marital property loosely refers to all items acquired during the course of a marriage including: any shared homes, cars, bank accounts, investments, businesses, children, pets, and the list goes on. In the game of “what’s mine is not yours,” marital property can be divided in one of two ways.

Community property laws would split marital property 50/50 between each spouse. Only nine states govern by this rule, in all divorce cases, according to the IRS. Equitable distribution takes in to account the financial situation of each spouse and divides the marital property accordingly.

While community property laws clearly state that property should be divided evenly (with a few exceptions, including any stated in a pre-nuptual agreement), the outcome of property division under the equitable distribution rule is not so clear-cut. An example of just how tricky the equitable distribution rule is comes into play when determining either spouse’s financial situation. One factor is the contribution by either spouse to the other’s educational expenses which in-turn gave that spouse more “earning power.” If, for example, one spouse paid for the other’s education toward a PhD, then that spouse may be entitled to a portion of the doctor’s earnings throughout the course of the marriage.

How to come out of a marriage no-less richer

A marriage is a legally binding agreement, only dismissable in a court of law. Like any such agreement, the single authoritative source on the subject should be your lawyer. Just be sure your credit card can front the legal fees.

IV. Canceling a TV Service

Americans love the boob-tube, but are more frequently jumping ship from their long-time cable providers. A few reasons for this shift in TV viewing habits include technological innovations giving rise to free program streaming via the internet and a competitive-rate cable TV market. No matter the reason, canceling a TV service is not cheap.

Direct TV

Direct TV’s customer service agreement does not state how much a cancellation fee would cost a customer, but it is clear that the company’s cancellation policy is iron-clad. If a customer’s credit card or debit card is on-file with the company (which is true for most paying customers), then the company reserves the right to charge either account for any outstanding balances and fees at the time of cancellation. Fees that a customer could be subject to include a non-returned equipment fee, applied to Direct TV cable receivers and other devices, a $300 Access Card replacement fee, and $15 deactivation fee.

Comcast Cable

Comcast Cable charges an early cancellation fee on the sly. Although the terms of service do not include an early termination fee for cable services, termination fees do apply to “triple-play” packages. Since many Comcast Cable customers subscribe to cable through a “triple-play” phone, internet and cable bundle, this fee does affect most subscribers. Fees may also be charged for any un-returned Comcast Cable receivers, or those returned in used condition. The fee for each receiver could be equal to the present retail value of the device at the time of service cancellation.

How to avoid TV service cancellation fees

As always, read the fine print before you sign a service agreement. Make sure that if you are buying into a bundle package like the Comcast Cable “triple-play”, you can cancel either of the three services while keeping the others at no cost to you.

BillShrink is coming up with more ways to help you save on your cable bills, so stay tuned and check back here often.

V. Other Outrageous Retail and Commercial Cancellation Fees

No-show and cancellations at the doctor’s office.

Many private practices charge no-show or cancellation fees because the overhead cost of operating a small office with few licensed practitioners can be costly. When patients cancel appointments at the last minute (typically less than 24 hours notice), practitioners lose treatment or prescription revenue, or the cost of the visit. According to a diplomate of the American Board of Internal Medicine, Thomas F. Comprecht, MD, ABIM, ABO, the code of ethics of the American Medical Association states that, “it is clearly ethical and appropriate to charge a patient for a missed appointment or for one not cancelled 24 hours in advance.”

To avoid these fees, plan your visits far enough in advance so you can commit to the appointment or cancel ahead of 24 hours before the visit – otherwise, have your credit card at ready.

Cancelling a hotel booking

Many, if not all, hotels have a cancellation policy that requires a fee to cancel a reservation. Travel editor of the LA Times, Catherine Hamm, said in an interview with videojug.com that, “hotel cancellations vary widely and sometimes wildly.” Hamm said that in some instances a traveler could end up paying for nights that they did not stay at the hotel.

To avoid these cancellation fees, know the hotel’s policy before you make a reservation. Also, book only for nights you are sure you will need to stay in the hotel.

Do you have an outrageous cancellation fee story? Share it in the comments section below…

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{ 4 comments… read them below or add one }

Patrick Clarke April 1, 2010 at 8:01 am

The Sprint Free Guarantee for new customers or existing customers who add a new line of service. For new lines of activation, this will be the most robust guarantee in the industry.

If a new customer or existing customer adds a line of service but then returns the device and deactivates within 30 days, we will waive the Early Termination Fee, and they will be reimbursed for the device purchase, activation fee, service plan monthly recurring charges, and all associated taxes and fees.

Sprint also will waive the restocking fee for new customer exchanges as part of this policy. Customers will be responsible for extras such as usage not included in their monthly plan, premium content, third-party billing, international charges and any taxes and Sprint surcharges associated with the extras.

The Sprint Free Guarantee will replace the 30-day Satisfaction Guarantee for new lines of activation. For upgrades and accessory purchases, the existing 30-day Satisfaction Guarantee will remain unchanged.

Reply

kim cobert April 15, 2010 at 10:40 am

When Direct Tv wanted to charge us $200 for cancelling, they said that i had signed and Equipment Lease Addendum. I sent them a formal letter telling them to show me what i signed, if they could i would no longer bother them; however the next thing i received in the mail was another invoice with a credit of -$200!! Guess they had NOTHING. Ha!

Reply

Sophie Lopez April 19, 2010 at 5:50 pm

I cancelled my AT&T phone plan because I bought the iPhone and it was soooooo expensive! Unlimited seriously cost me $150. But I found a new company called, ‘Fuzion Mobile’ and no joke it works on my phone and only is $50 a month unlimited.
So I cancelled and paid the stupid fee. But Fuzion is going to save me so much! I wish i would’ve read this blog earlier to talk my way out of the cancelation fee. oh well :)

Reply

Allie March 25, 2012 at 8:06 pm

You can get out of a cell contract, via the “materially adverse clause”. That’s when a company, like verizon, raises any of their fees. Even if it is only a one cent fee. It doesn’t apply if its a goverment fee hike. I believe you have 60 days to cancel, based on the fee hike being a financial burden. The cell company might try to say its a government fee. Make them explain it throughly. They will offer you discounts, phones and credits. If you want out stay firm. Look at the fine print. Its usually buried in the even smaller fine print.

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