When Breaking A Contract Early Makes Sense

There are two types of contracts that many of us enter into that charge a penalty for breaking early: renting an apartment and signing up for a new cell phone. In both cases, depending on how far into your contract term you are, you are looking at a lot of money if you were to end the contract early. Financially speaking, this rarely makes sense. I say rarely, because sometimes it does make sense. Below are two reasons, one financial and the other non-financial, when breaking a contract early is a good thing.


Saves You Money

If you just signed up for a new cell phone, chances are breaking the contract early will carry with it hefty penalties. Many times, it is $325 plus $10 per month left on your contract. If you have two years remaining, you are looking at over $500 in charges. This is rarely worth it. The only time it is worth it is if you can save a lot more money by going somewhere else.

If you can sign up for a pre-paid cell phone that costs you $35 per month and you are currently paying $100 per month you could close to $1,000 by switching. You currently pay $100 per month for 24 months, or $2,400 for the two years. At $35 per month, you would pay $840 in total. Add the $565 for breaking the contract early to this amount and you arrive at a total cost of $1,405 for the two years. The difference is $995.

In order to know if it makes sense for you, you will have to do the math. It’s not hard math either. Just make certain that you know of all of the fees and charges your current provider is going to charge you for ending the contract early.

Also, make certain that your new plan is comparable or is offering you the service and features you need. There is no point in switching when you can’t get by with the lower priced plans features.

Safety and Peace of Mind

The other time it makes sense to break a contract early is for safety and peace of mind. I have a friend that moved to another state for a job. He went to the state a few weeks early to look for an apartment. He found one he thought was nice and put a security deposit down for a year. Fast forward to him living there and it is a complete nightmare.

The maintenance people don’t do their job. His neighbor does drugs all day long. There are other residents that are running from the law. The list goes on. My friend can either continue to pay the $1,000 per month to live there or break the lease and live somewhere else. The cost of breaking the lease early was roughly $3,000. He decided to pay it.

In this case, there is no financial benefit for making the switch. His new apartment is costing him the same amount each month. He is simply out the $3,000. If you ask him, he would pay that money again in a heartbeat. There are times when the amount of money doesn’t matter. All that matters is your well-being and peace of mind.

What if someone came looking for his drug dealing neighbor and broke into my friend’s apartment by accident? He didn’t want to take this chance. The $3,000 he paid was worth his safety.

Final Thoughts

Breaking a contract for monetary reasons is easy. All you have to do is some basic math to understand if doing so is worth it financially. When it comes to non-financial reasons, the line becomes blurred. In these situations, you have to be true and honest to yourself and know what is most important to you. Yes money is important, but my guess is that your health and safety are more important.

This isn’t to say that parting with $3,000 like my friend did would be easy to do. It was hard for him. He works hard for his money and values it. But he knows that he can earn that $3,000 back whereas he can’t earn back his life.

Readers, what other ways does it make sense to break a contract early?

4 Responses to When Breaking A Contract Early Makes Sense

  1. moneystepper says:


    First – work out the maths. If its easy, then break the contract. I’ve had this happen a couple of times and it made the decision a no-brainer.

    Second – work out the value. This is harder and can work both ways.

    It may be financially sound to break the contract, but the value of the comparison service may be slightly different to your current one. We’ve recently been in this boat with a rental apartment.

    Equally, it may be the other way round. It may be costly financially to break the contact, but the benefit you’ll get from doing so is much more than financial!

  2. Spot on. It’a tough decision to make but we can never put a price tag to our safety and well-being. Good for your friend.

  3. If I could save money by ending a contract early, I believe this is a win-win situation because it allow me to free up some money to spend else where.

  4. Alexa says:

    I would’ve done the same as your friend. My safety would be far more important than the money. Especially if I was near a drug dealer – that’d be a definite contract breaker.