I’ve warned you many times (on TV and my blog) about cell phone fees, and here’s another “watch out!” AT&T is drastically raising its early termination fee (ETF) for so-called “smart phones” (like the iPhone). If you want to escape your two year contract before its over, it’ll cost you $325. That’s up from $175. Ouch! Verizon did the same thing a few months ago.
Why such a cruel punishment penalty? This is from an AP story:
AT&T charges customers $199 for the latest model of the iPhone, but pays Apple Inc. far more than that. AT&T makes the subsidy back through the customer’s service fees over the two-year contract period. AT&T likely loses money for every customer that breaks a contract and pays a $175 termination fee, but may break even with the new, higher fee.
The new ETF begins June 1, and doesn’t affect current contracts. But it will affect a lot of iPhone users (including myself) thinking of picking up the new, updated iPhone this summer. So if you get “cold feet” after signing that contract, it’ll cost you.
AT&T also said it will lower the ETF on its basic phones (dumb phones?) by $25, to $150.
The fee on smart phones will be reduced by $10 each month of the two year contract, while the basic phone fee will decline by $4 a month.
Something to think about the next time you we want to buy another smart phone, and the contract that comes with it.