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Everyone has a mobile phone these days. They’re handy little gadgets that help to keep us connected to all the important people in our lives when we’re on the go. More and more people are substituting their traditional landline phones for mobile phones. After all, why pay for another phone line when you always have your cell phone with you?

But in order to have a cell phone plan that offers you talk, text, and data services, you typically need to be under a contract with a cell phone provider, unless you choose a pay-as-you-go type of plan. The advantage of cell phone contracts is that they typically allow consumers to get their hands on an expensive mobile phone without having to pay for them outright. Considering the cost of most mobile phones, this can help save consumers the stress of having to save the money needed for a large purchase.

But what if you want to break your cell phone contract early before its expiry date? Is this even possible? And if so, what types of penalties could you face for getting out early?

Reasons People Want To Cut Their Phone Contract Short 

Before we get into breaking your cell phone contract early, let’s go over some of the more common reasons why people may want to cut their contract short in the first place:

  • You found a lower price with another cell phone provider
  • You’re dissatisfied with the service you’re getting from your current provider
  • You can’t afford your current payments
  • You want to move to a new location
  • You don’t use your cell phone very much
  • You’re going through something in your life that warrants the cancellation of your cell phone contract

Do you need managing your recurring expenses more responsibly?

What Are The Early Contract Termination Fees?

Can you cancel your cell phone contract? Yes, you can. But not without paying your current cell phone service provider certain cancellation fees. 

Most cell phone contracts require that a contract cancellation fee be paid if the user decides to terminate the contract early before the expiry date. These early termination fees generally range anywhere from $150 to $200 if the terms of the contract are not fulfilled, including not sticking to the contract until the expiry date. 

Some carriers are also adopting new programs that are geared toward device payment plans. Rather than getting a discount and long-term contract, consumers pay a small monthly fee on top of their service fees until the cost of the mobile device is fully paid off. For the most part, if you cancel your contract early and you don’t return the phone in good condition or pay it off in full, you may be charged for the remaining cost of the phone. 

How does your budget compare to the average Canadian’s budget? Find out here.

Can You Avoid The Early Termination Fee (EFT)?

While an early termination fee is a typical charge that most cell phone carriers require their customers to pay if the contract is cut short, there are some ways that such a penalty fee can be avoided. 

Go with a “no contract” phone plan. If you are able to get your own phone without having to sign a contract to obtain one from your cell phone plan provider, you can get all the data, texting, and talking minutes you need without having to sign a contract. Instead, you just pay as you go and will only be billed for what you use every month. Without a contract, there’s nothing to break, which means you can come and go as you please. 

Transfer to a phone provider who will pay for cancellation fees. As you may have noticed, there are dozens of cell phone service providers out there, all vying for your business. In order to remain competitive, many of these companies have adopted tactics that involve forcing consumers to leave their current providers for them. And while there are a few ways that they can do this, one way is to offer to pay the early termination fees that are charged when a contract is cut short early.

Every company’s offer may vary somewhat. For instance, some companies may add the discount to your first bill, while others may offer you a pre-paid credit card that includes the amount of the early termination fee. Whatever the case may be, this is a great way to move to a new carrier without having to front the penalty fee yourself when you break your contract with your current provider. Since all carriers have different transfer plans, make sure to check with each one to verify what their current offers are.

Cancel during the “cooling-off period.” Most cell phone contracts include a “cooling off” or “grace” period whereby you are given a chance to cancel your contract within a certain number of days after signing on. Generally speaking, this cooling-off period lasts about 14 days and is a period that begins the day after you sign the contract. The caveat here is that the contract must be agreed to over the phone or online. If you sign a contract in person, this cooling-off period may not exist. 

Your cell phone provider increase your fees without warning. By law, your cell phone provider must give you ample notice that your fees will be going up before immediately increasing your fees without warning. Generally speaking, this should be at least 30 days beforehand and must not be midway through a billing period. If this happens, you have the right to cancel your contract and go elsewhere. 

Have a gym contract you no longer use? Learn how to get out of your contract.

Transfer Your Contract To A Friend

There’s another savvy way that you can get out of your contract early without incurring any penalty fees: by transferring your contract to a friend or family member. If you know someone who needs a cell phone and is willing to adopt your current phone and plan, you may be able to get out of your contract early without having to pay a penalty fee. 

This process is free and involves both of you signing an agreement whereby the contract will be assigned to another individual under the same terms. The other person may still have to undergo a credit check in order to ensure they are able to qualify for such a contract. Further, your bill must be in good standing; any outstanding fees will have to be dealt with before a transfer can take place. But if all goes well, the contract may be transferred. 

The cell phone provider will send a copy of the contract terms to the person that the contract is being assigned to. Any minutes or charges will be prorated between you and the other person. 

If you can’t find someone else to take over your contact for you, you can pay a service to find someone on your behalf. Some services charge a fee, while others are free of charge. 

Why Avoiding Payments Won’t Get You Out Of Your Phone Contract Early 

Just because you no longer want to keep your cell phone contract doesn’t mean you should give up on making payments altogether. Doing so will have consequences that you’ll be stuck with. 

If you stop making payments to your cell phone provider, they will make a number of attempts to collect. But after several failed attempts, they will likely send a collection agency after you for payment. Not only can this be a real nuisance to have to deal with, but it can also have a negative impact on your credit score. Once a collection agency is sent to collect payment, the credit bureaus will be notified, which will then be noted on your credit report. 

The thing is, your cell phone payments are not recorded on your credit report and therefore do not have a positive impact on your credit score. But as soon as you are delinquent in your payments, your score can take a hit.

Failure to make bill payments is perhaps the worst thing for your credit score. Much like skipping off on car loan payments, or personal loan payments, missing cell phone bill payments can be detrimental to your credit profile and can make it difficult for you to secure another cell phone contract in the future. 

Interested in more information about what a collection agency can do in Canada?

Do You Have To Unlock Your Phone After Cancelling Your Contract?

If you are still under a contract with your current carrier, they won’t unlock your mobile device until the contract expires. If your phone came from your carrier, it will be locked, which means that the device can’t be taken elsewhere. A “locked” phone simply means that it only works with SIM cards that belong to the current network. The phone will not be able to detect another network’s SIM. 

As such, the phone will need to be unlocked before it can be taken to another carrier. The majority of cell phone providers offer unlocking services for a fee, typically around $25 to $50. Otherwise, you can take your phone to a cell phone repair service provider that offers phone unlocking services, again for a fee. You can only bring an unlocked phone to a new service provider if you want to switch carriers. 

Can You Still Keep Your Old Number?

An understandable concern when it comes to switching cell phone carriers is whether or not you will be able to keep your old cell phone number. It can be a hassle to have to notify everyone who has your current number that it has been changed. It would be so much easier if you could just keep your current number.

The good news is, you can. As long as you are switching service providers and are still in the same geographic area, you should be able to keep your current phone number. 

Final Thoughts

Getting out of a cell phone contract can definitely be done, but in most cases, a penalty fee will have to be paid. That said, there may be certain circumstances in which you can get out of your contract early without having to pay these fees, depending on your situation. Regardless, it’s important to continue making your payments to your current provider until the switch is official in order to make sure your credit profile doesn’t take a hit. 

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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