What’s an Early Termination Fee?
Aug 15, 2022

Want to switch plans? Make sure you read about this sneaky fee before doing so!

There are so many amazing broadband, power, and financial plans on offer at the moment! There’s never been a better time to switch providers. We highly recommend you do so, as you’ll save heaps of money and find the perfect plan for your needs! 

However, there is one thing you should think about first. If you’re currently on a fixed-term plan, you’ll want to double-check the terms and conditions to see if there are any early termination fees. These fees could set you back hundreds of dollars!

Unsure what an early termination fee is? 

Don’t worry! We’ve got you covered. Here is everything you need to know about early termination fees! 

What is it?

An early termination fee is a charge that you receive when you cancel your plan early. This fee is supposed to cover any losses that the company may incur as a result of a customer cancelling their plan before the contract ends. 

The amount that you can be charged for an early termination fee varies between providers. It’s commonly around $200 but it can be more or less. So, it’s really important to figure out the cost of this fee before you sign up, to see how much you’ll have to shell out if you want to cancel early. The provider should advise you before you agree to the contract but take control and ask them first!

When do they apply?

Early termination fees only apply to fixed-term plans. These plans last for a fixed period of time, usually 12 months or 24 months. You are required to stay on these plans until their end date.

You will likely be charged an early termination fee if you:

  • Cancel your plan early (e.g. 6 months into a 12 month contract)

  • Change to a different cheaper plan that the same provider offers. 

  • Want to upgrade from a VDSL or ADSL connection to a Fibre or HypeFibre connection. 

Generally, if you’re trying to change your plan in some way, be prepared for a fee. Some retailers may want to keep you more than they want to lose you over an Early Termination Fee, before you make a choice, have a chat with them first to see where you stand. 

What about open-term plans? 

Fixed-term plans can be a big commitment, with high costs if you change your mind. Therefore, many people prefer open-term plans. These plans don’t force you into a long contract and don’t have early termination fees. You can start and stop your plan whenever you like. 

However, open-term plans don’t always have as competitively low prices or special offers like fixed-term plans. You may also still end up paying more when you try to cancel your plan. For instance, you could be charged for a whole month (until the end of the billing period), even if you decide to cancel the plan halfway through the month.

Open-term plans are great for those who need flexibility in their lives but it’s good to remember that they come with drawbacks too. 

Received a free big incentive? Watch out! 

One of the big reasons that people join fixed-term plans is because they offer great deals or ‘freebies.’ 

Fixed-term plans usually grab customers’ attention with cheaper pricing for a few months (which will save you hundreds of dollars) or free items like a brand new TV or modem. 

If a fixed-term plan is offering a large free incentive, you want to be careful. This is because you could be charged an early termination fee that covers the price of the incentive. For example, if you sign up to a plan where they give you a free TV but you leave the contract early, then you may be charged the price of the TV and/or an additional fee. 

So if you’re jumping into a plan with amazing freebies, remember to read the terms and conditions thoroughly to make sure you don’t end up worse off later down the track. 

Know your plan & early termination fees well! 

Understanding your plan and if any early termination fees exist is absolutely crucial. For one, this will help you get a better grasp on how much you might need to fork out if you want to change plans. Also, it’ll help you know when you don’t need to pay a fee. 

The recent news from the Commerce Commission reinforces why you need to understand your plan well. A few weeks ago, the Commerce Commission announced they are filing multiple charges against Mercury as they believe the provider misled customers into paying early termination fees, when they didn’t have to.

This case shows how important it is to be aware of what’s involved in your plan so that you don’t run into any financial burdens. 

How do I avoid paying an early termination fee? 

If you are keen to switch to another plan but want to avoid an early termination fee, here’s what you need to do: 

  • Switch when your plan ends. This will ensure you’re not charged an early termination fee.  

  • If you contact your provider before your plan ends (even if it’s just weeks or days before the end date) they could charge you an early termination fee. So double-check your terms and conditions to see if they will do this. 

  • If your plan has already ended, you may have rolled over to an open-term plan. Cancelling an open-term plan should not incur a charge. 

Use NZ Compare!

If you want to know more about early termination fees, then make sure to head to NZ Compare! 

NZ Compare is the home of various comparison websites where you can compare your power, broadband or financial plans quickly and easily for FREE!!

Under each plan, we list whether it includes an early termination fee or not, and the cost.

Also, if you use our comparison websites, you’ll save hundreds of dollars AND find the perfect plan for your needs! To discover all this and more, follow our simple steps:

  • Jump onto our websites below.
  • Type in your address.
  • Select some filters that match your preferences.
  • Hit enter!
  • Browse all the different plans available to you & compare them side-by-side.
  • Find one you like and switch!

Alternatively, if you’d rather talk to a friendly human, then give our customer support team a free call on 0508 22 66 72. They’ll help you out! 

So, make sure to jump on NZ Compare to find the best plan for your life!