Everyday Cheapskate

I get plenty of mail from readers wanting to know how to break their (cell phone, satellite TV, gym membership) contracts, but lately, those questions have increased dramatically for two reasons:

1. People are looking for expenses they can eliminate, because they have lost their jobs or they're concerned that they might.

2. Consumers sign contracts too casually these days, without regard for the fact that they don't know what's going to happen in the future.

Let's consider why a service provider pushes hard to get you to sign on the dotted line. Take a cell phone, for example. If you buy that phone outright, it might cost $300. That's a single sale. If the people at the company can get you to sign up for a two-year contract for $89 a month, they're happy to throw the phone in for $99. Sure, the sale is reduced by $201, but they get to add you as an asset on their balance sheet under "Accounts Receivable." They have a legal right to $2,136 of your money over the next two years. You have just contributed to their profits and to the company's net worth.

You, on the other hand, do not know for sure that you will be able to pay $89 every month for the next two years. So why did you sign? It's likely that you didn't think about it. After all, isn't everyone signing cell phone contracts these days?

Contracts are legally binding agreements that require payment in the future. That's what sets them apart from other types of agreements or promises. When you sign a contract, it's a serious commitment.

If you find yourself in a pickle with a contract, pull it out, along with a magnifying glass. Read it thoroughly. Look for terms such as "early termination" and "buyout." Many consumer contracts these days have these kinds of provisions built in. If you find nothing, contact the company. Ask whether there are terms under which you could be relieved of your contract. Then get ready to negotiate.

One reader wrote that her satellite TV contract has an early termination allowance. To act on it, she would have to pay $12 for each month remaining on the contract, in one lump payment. She has 18 months remaining, and her regular monthly charge is $39. Should she terminate? That depends on her future plans, but given the information she offered, my answer is yes. For $216 now, she could avoid paying $702 over the next 18 months. She's fortunate to have found that termination clause.

The time to give a contract serious scrutiny is before you sign it, not six months into the term. Then it might be too late. Ask yourself this: How do I know I will have the money to pay this contract a year from now? If you do not have a good answer, keep looking until you can find a company that will provide the services you need on a pay-as-you-go basis.

Mary Hunt is the founder of www.DebtProofLiving.com and author of 18 books, including her latest, "Can I Pay My Credit Card Bill With a Credit Card?" You can e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

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