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Nickels & Dimes: Sprint to Charge $350 for Early Cancellation

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Sprint customers considering defection got a carrot a week ago, when analysts started talking about Sprint getting the iPhone in October.

Starting Sept. 9, they’ll get the stick. Sprint confirmed to Pay Dirt that a week from Friday, it will raise its early-termination fee on new contracts from $200 to as much as $350 for owners of smartphones, tablets, notebooks and netbooks who leave their contracts early. The amounts will be prorated at an as-yet-undisclosed rate, depending on the number of months left on your contract.

It’s yet another sign that Sprint is likely getting the iPhone, says Todd Day, an industry analyst for Frost & Sullivan, though the carrier hasn’t confirmed the rumor. Early termination fees give the carrier a way to offset the deep discount they typically offer for the phone itself. “They expect a lot of iPhone sales, and they don’t want customers to buy those phones [at a discount] and then turn around and leave for whatever reason,” he says.

AT&T and Verizon Wireless have introduced similar charges in recent years as they offer more expensive technology. AT&T increased its maximum early-termination fee from $175 to $325 last year for smartphones, tablets and netbooks. Verizon Wireless charges up to $350 for smartphones, netbooks and tablets. On both carriers, basic phones carry much lower fees.

Although the fees drop the longer you stay under contract, they never completely zero out — there’s always going to be a cost to leave even a little early, says Schwark Satyavolu, a co-founder of comparison site BillShrink.com. Still, the early termination fees needn’t be too much of a deterrent, depending on your phone. As we’ve previously reported, resale prices for some of the hot handsets are often enough to recoup the penalty for leaving early, plus cash left over for your next handset on a new carrier.

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    • If they’re going to boost cancellation charges, maybe they should make the subsidy charges more explicit, and give customers even more reasons to buy their phones outright. I’d rather pay $600 for the phone (rather than a $200 subsidized price) and get a $20 monthly savings with no contractual obligation.

      This approach would free carriers from technology and default risk. And given that US networks require carrier-specific phones, people with $600 invested are not really more likely to defect.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.

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