Getting off cell phone hook

PERSONAL FINANCE

Your Money

August 14, 2007|By EILEEN AMBROSE

Carolina Coutinho had been putting up with poor cell phone service for six months.

Her phone worked fine at her parents' home in New Jersey and on the Rutgers University campus where Coutinho is a senior. But service at her new apartment was iffy. She sometimes missed calls from her employer. She wanted to switch carriers, but didn't want to pay the $200 early termination fee for breaking her contract.

Then one of her co-workers about a month ago told her about Celltradeusa.com, a Web site where consumers can unload their cell phone contracts. In about a week, she found someone to assume the 13 months left on her contract.

"It was like eBay. People were bidding on my phone," the 23-year-old says.

Plenty of American consumers are in a similar predicament. A U.S. Public Interest Research Group study two years ago found that nearly half of cell phone customers would switch carriers, or at least think about it, if they didn't have to pay an early termination fee. Considering the tens of millions of cell phone users in the United States, that's a lot of unhappy customers.

Matchmakers

Online companies have since launched to match buyers and sellers of cell phone contracts. Of course, cell phone owners could find a friend or relative to take over contract on their own, but the Internet sites can make the search easier.

Celltradeusa.com and Cellswapper.com are the two major players in this fledgling industry. Both charge about $20 to the consumer unloading a contract once one or more prospects are found.

That's a lot cheaper than termination fees that run $150 to $200 per phone line, according to Eric Wurtenberg, co-founder of Celltradeusa.com. "Family plans have three or four lines. That's $600 or $800," he says.

Most people are eager to dump their contracts because of poor reception, Wurtenberg says. They might move and find that the phone service no longer works well in their new house or apartment, he says.

Buyers often want to want test-drive a carrier or just don't want to commit to one for years, says Adam Korbl, co-founder of Cellswapper.com. Plus, by assuming another's contract, buyers can avoid a $35 activation fee.

Celltradeusa and Cellswapper work much the same way. Cell phone owners post ads detailing the contract terms. They often offer incentives, such as paying one month's service or throwing in the phone for free. Postings often include a photo of the phone and comments, such as this one on Celltradeusa:

"The phone is in fair condition. It has been dropped in the water but it works, a few small nicks and dings - nothing major. I use the phone still."

Shop for free

Buyers shop the Web sites for free. A buyer and seller negotiate a deal on their own and then contact the phone company.

The buyer must pass a credit check. Consumers who have been rejected for a full contract because of poor credit often find they don't have the same problem when taking over a contract for a short time, Korbl says.

Buyers can bring their old telephone number with them, Wurtenberg says. Phone policies generally require customers transferring their contact to forfeit their number, but some persistent consumers have managed to keep theirs, he says. Once the phone company transfers the contract, the seller is off the hook.

Coutinho says the first nibble on her phone contract petered out. She reached a deal with the next person and spent about an hour transferring her contract. "It was great. I saved $180," she says, after paying the $20 fee.

Verizon Wireless spokeswoman Sherri Cunningham says those assuming contracts should be wary of taking over a stranger's phone that might have been damaged.

Verizon and other phone companies also say they've already adopted more flexible terms to retain customers.

Fee declines

Verizon, for instance, now has a declining termination fee that starts at $175 and drops $5 for every month of service.

Joe Ridout, a spokesman with Consumer Action, says the trading sites can be an inexpensive escape hatch. But consumers have another outlet, too.

When phone companies suddenly changes terms, customers usually get a limited time to exit a contract without incurring a termination fee, Ridout says. Make sure you read notices from companies so you are aware of these exit opportunities, Ridout says.

U.S. PIRG's Ed Mierzwinski says cell phone swap shops can help a few people, but don't resolve the big problem. "Early termination fees should be banned so consumers can shop around," he says.

Questions? Comments? Write personal.finance@baltsun.com.

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