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Not reading a cell contract can dial up the wrong numbers

My four-year-old son started junior kindergarten last week and my back-to-school purchases were minimal: indoor gym shoes, a snack container, and his first knapsack.

My cousin's 18-year-old daughter left her New Jersey home to start classes at McGill University in Montreal and as you can imagine, her shopping list was a wee bit longer. One thing she needed was a new cellphone contract, something with unlimited texting and reasonable long-distance rates so she can check in regularly with her parents and keep in touch with her friends at home.

New smartphones and all kinds of deals are often brought out during the back-to-school season, which along with Christmas is a key period for cellphones sales. And although it is exciting to get a new cellphone with all of the latest bells and whistles, it is equally important to pay careful attention to the service contract.

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Margarett Best, the Minister of Consumer Services for Ontario, says one basic thing students and parents can do to avoid surprise fees on cellphone bills is to fully read and understand the contract – before signing it. This is especially true for people who are considering signing on to long-term contracts.

"Consumers need to be sure this is the kind of contract they want to enter into, to check the terms and the period, so see what they are getting for their money, or if there are any additional costs that they will incur outside of what is listed there," Ms. Best said in an interview. "Take some time to think it over, ask questions – and don't sign that contract on the spot."

Two complaints among cellphone customers are contracts being rolled over without their consent, as well as hefty cancellation fees for those who try to break their contracts early. A previous Home Cents blog discussed ways of breaking a contract without paying a penalty.

Some of the onus should be placed on cellphone providers to ensure that consumers are getting contracts that are easy to understand, Ms. Best said. But Canadians should also be aware of what the are getting themselves into when they sign any kind of a agreement that has financial repercussions.

Barbara Gosse, director of saving and asset-building initiatives at Social and Enterprise Development Innovations, a non-profit organization that runs the Canadian Centre for Financial Literacy, says she knows from experience in working with young people that many of them struggle to understand cellphone contracts.

She believes they are a leading cause of debt among youth and can have major financial repercussions as they transition into adulthood. "Debt problems can start with something that seems relatively safe - like a cellphone." A few unpaid bills can quickly result in a bad credit rating, she added, which will "impact their ability to move forward into the financial mainstream."

In the spring, the Ontario government followed in the steps of several other provinces and proposed legislation that would eliminate unexpected fees on cellphone bills by making it easier for consumers to understand the costs and terms of wireless services agreements and allowing them to cancel their contracts at any time, while placing a ceiling on penalties. That bill has been introduced but not yet passed into law.

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The Ontario Ministry of Consumer Services has these four tips for consumers who are thinking of signing a contract.

1. Shop around.
Since many agreements are for a two-year or three-year period, be sure you're getting the deal that offers you the services and goods you want, at the best price.

2. Keep a copy.
Ask for a written copy of your contract. Read the fine print to make sure you understand all of terms before you sign.

3. Compare and contrast.
When you get your first bill, check it carefully against your contract to be sure you are only being billed for what you agreed to.

4. Keeping them honest.
Remember – it is illegal for vendors to make false, misleading or deceptive representations about what they are selling you.

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About the Author
Personal Finance Web Editor

Roma Luciw is the Globe and Mail’s personal finance editor. She has worked at the Globe as a business journalist since 2001, covering stock markets, breaking news, and most recently anything that helps regular Canadians manage their own money. More

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