Drop the Contract

Do you know anyone who does not have a cell phone?  Do you know anyone who has switched cell phone carriers recently?  It’s highly likely that your answer to both these questions is no.  According to the Wall Street Journal there are 326 million wireless subscribers in the US but only 19 million of them may consider switching to a new carrier.  Why is that?

The Journal cites better coverage and better handsets.  But they also mention two-year contracts with penalties if you leave early.  And those penalties add up.  My husband and I had a two-year contract with AT&T through midnight, Pacific Time on June 25, 2015.  We were completely paid up through the end of our contract.  But we needed a new carrier because even though the Wall Street Journal claims that AT&T is expanding coverage, it did not provide service at my new place of employment.  So we switched on June 18, 2015.

Before switching we did everything various blogs recommended.  We paid our bill in full.  We contacted an AT&T service representative who assured us that since we were completely paid up we would have no additional fees.  Even so, in July, we were hit with an early cancellation fee of over $200.  An AT&T manager who hung up on me (yes, AT&T customer service lived down to its well-publicized reputation) explained why.

It turns out that AT&T prices each smart phone at $325.  During every month of your 24-month contract, you “pay off” $13.50 of that amount.  However, if you leave your contract early, even if you have paid up through the end of your term, you will be charged more than seven times the phone pay-off amount.  So instead of crediting us with having “paid off” the last $13.50 in June, AT&T charged us $95 plus taxes per phone.

Now, there are stories out there about folks who called their carrier and were able to avoid the early cancellation fee.  They may well be true.  But Consumer Reports recommends not having a contract at all and buying your phone outright.  And, having been through the very unpleasant experience of dealing AT&T which (in the polite language of an industry reviewer has the “stingy unlocking policy that doesn’t liberate your phone until you conclude the contract”) I will in future follow Consumer Reports’ advice.

A quick glance online told me that amazon (which ironically is where we bought our current phones at a steep discount) has financing plans available for purchases over a certain amount.  Yes, if you don’t pay that amount off in the prescribed time period, they will charge an interest of almost 26% of the purchase price.  But even that seems a better deal than paying over $200 for exactly nothing.

So let me echo Consumer Reports’ advice: drop the contract.

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