Cancelling a contract early costs how much?

Did you know that if you leave your broadband contract early you are likely to be charged an early exit fee? If not, you’re one of a majority who are in the dark about this practice.

These days we sign up to so many consumer contracts, not just broadband but also for telephone, mobile, energy, insurance products and more, and if you leave any of them early you could face a penalty.

But if you at least know that penalties exist, you will make the right decisions about leaving and switching your contracts so that you can save money.

 From Tina’s slot on Today with Miles Dungan, 29th August 2013.

All of us agree to the terms and conditions of a contract when we sign up to a service. And these days we are tied in to more and more of them. You will have several insurance contracts for example and ones for electricity and maybe gas too. You’ll have one for a landline and a mobile and almost two-thirds of households also have broadband contracts. For other services like buying a flight or a seat on a ferry; services you may need to cancel later, you are also agreeing to terms that dictate what will happen if you cancel.

These contracts operate on a ‘one size fits all’ basis and are not individually negotiated. But even if you don’t bother to read them – and you probably don’t – and even if you don’t think of them as legal contracts; they are. You are bound by what is written inside, and that includes any early exit fees or cancellation fees that may apply.

Recently the comparison site uswitch.ie published a survey showing that 63% of Irish consumers do not know that there are penalties to leaving a broadband contract early.

This lack of clarity could cost consumers dear.

So how much would I pay in early cancellation fees for service contracts?

Energy

The penalties applied for leaving your gas or electricity contract early are pretty straightforward.

With Airtricity it’s €50 in year one or €25 in year two or €100 and €50 respectively if you are on a dual fuel package. If your contract lasts just one year and you leave within that year you pay €25 or €50 on a dual fuel deal.

Both Electric Ireland and Flogas charge a €50 early exit fee, while Bord Gais lists no charge.

But needless to say there is often some charge or another! For example if you are moving house and can’t provide the name of the new inhabitant you’ll have to pay Bord Gais €141.21 to unlock your gas meter or €97.61 if it’s electricity.

Phone and broadband

Whether landline, mobile phone or broadband, if you have a contract with any telecoms provider and leave early you will have to pay something.

Rather than have fixed early exit fees, when it comes to telecoms contracts you’ll usually end up paying whatever is left to pay until the contract would have expired.

For example, let’s say you were on a €45 a month tariff and you leave with two months to go before the end of your contract, then you’ll pay the €90. Let’s say you were paying €30 a month and you have six months left, now you pay €180.

However, there are options if you want to avoid lengthy contracts and these possible pitfalls, especially knowing that some are two and three years long.

If you use Magnet for your broadband for example there are no contracts and so no early termination fee. With Sky they give you a longer change of mind period (30 days). For mobile phone you could opt for pay-as-you-go or SIM only where the contracts are just 30 days long.

TV

If you have a subscription with UPC there is a cancellation fee of €200 if you cancel within the twelve month contract period.

If you are a Sky customer and you end your contract within the first twelve months then you will also pay a penalty of what is still owed. The amount charged may not be an exact multiple of the monthly charges remaining as it’s based on the number of days left.

But if you are using Saorview for your TV service or have a satellite dish to use free-to-air to access television, you don’t have a contract and therefore there are no penalties for leaving.

Insurance

For most insurance polices i.e. home, motor etc if you cancel mid-term you will still have to pay the remainder of monthly payments owed and sometimes there will be an addition ‘administration’ fee too.

But for health insurance each provider outlines specific penalties for leaving mid-term and these are worth noting, given the continual rises in health insurance premiums and consequent need to look for better deals and switch.

Aviva charges an administration fee of €25 and the levy on a pro-rata basis. VHI charges a €50 admin fee and the health insurance levy on a pro-rata basis, or the cancellation fee is €40 if you are cancelling a dental cover product.

Glohealth on the other hand may charge you the balance left (i.e. monthly charge x months left) or the levy and Laya Healthcare will charge you the remainder of the premium owed.

That’s not all!

Bear in mind that other services you buy, such as refuse collection, there may be cancellation fees too. And even though they may not be repeat services, when you buy a flight or a ferry ticket for example, they will also have clauses relating to cancellation in their terms.

 

You may lose the total price of the flight ticket if you cancel for example and be charged to request a refund of taxes; for ferries and holiday packages you will either lose the whole amount if you cancel or you may receive a partial refund the further away you are from the date of travel.

Whatever the outcome, the moral of the story is that you should make the decision to purchase carefully, because if you want to cancel early there will be consequences.

Cancelling service contracts – what you need to know

• If you want to cancel very soon after purchase you may be in luck. That’s because for online purchases or those bought at the door you will have at least a seven day ‘cooling-off’ or cancelation period and that extends to fourteen days for financial products like insurance.  So, if you want to change your mind, do it quickly!

• The one way you’ll be able to get out of a contract without a penalty is if the service provider changes a significant part of your agreement. If so, because they’re the ones altering the agreement and not you, then you’ll be given a window of time (often a month), where you can pull out without penalty.

• The smart way to cancel is when your contract expires. But be careful. Bear in mind that many contracts require a 30-day notice period. That means you must tell them a month before your contract is up, otherwise you’ll have to pay the extra month.

• You might be able to change the contract you are in to another one from the same service provider after a minimum period has passed, so that may be an alternative to cancelling and will mean you avoid any penalties.

• Of course even handier, though often unavoidable, is not getting in to too many contracts in the first place. There are alternatives for TV, broadband and mobile that are contract-free or very short contracts (i.e. one month), so you can explore those.

• Finally, you should definitely switch if you can get a better deal. Just think twice before you sign up to anything and make sure the contract you are opting out of is up so that you won’t end up out of pocket.

Tags: cancellation fee, Cancelling contracts, consumer contracts, contracts, energy, exit fee, insurance, telecoms, termination fee