You may not read them and you may not even know they are there. But when you sign up for a service such as for TV or phone, you are entering into a contract with the service provider and in doing so you are agreeing to the terms and conditions they set.

If you don’t read these terms, then you should at least ask or double-check one very important thing: how do I cancel?

With most of us looking to ‘switch and save’ this is crucial as there may be financial penalties if you leave mid-contract and without realising this many people find themselves facing large bills and they’re not even sure why.

Consumer expert Tina Leonard has the details.

Leaving your contract early – what can happen

Case 1: Cancelling TV

Patrick decided to cancel his TV subscription service and get a dish instead and he simply called the company and told them so. But he was advised that he had to give thirty days notice to cancel as per his subscription agreement. He says that he never signed an agreement and didn’t think he should pay for the extra thirty days, so he didn’t pay.

Letters arrived for the balance of one month due, which was then increased by a €10 late payment fee. Then he received a debt notification letter, stating that if he didn’t agree within five days to pay, the legal department would issue proceedings. So Patrick paid so that the distressing situation would come to an end.

Case 2: Cancelling phones

Maura changed her phone provider for landline last October and simply called her original provider to cancel and assumed that would be that.

But since then she has continued to be charged €9.99 a month from the original provider via direct debit and says that despite her request they won’t stop.

Case 3: Cancelling mobiles

Sinead switched mobile phone service provider to get a better deal. On calling them they told her they could take care of switching her account to them, so she didn’t have to call her original provider. After she had signed up with the new operator, she received a bill from her original provider for approximately €800.

It transpired that she was actually close to the start of a 24-month contract with her previous provider and so they were now charging her the combined monthly standing charge up until her contact end date. Sinead wondered why she wasn’t told before she switched.

So, should Patrick have paid the month’s TV subscription in lieu of giving a month’s notice; should Maura still be charged €9.99 per month and should Sinead have been notified of the huge bill she would face on switching?

In all of these situations, the customers were penalised because they did not realise that there were consequences to leaving a contract early. It’s all there in the terms and conditions - which people don’t read – so while in an ideal world, all service providers would make crystal clear the obligations their customers have if they leave early (up front and in big bold writing), in reality many consumers have no idea of the consequences.

How to cancel and switch without penalty

1. Know if you’re in a fixed term contract

It may seem obvious, but you should be fully aware if you have signed up to a fixed term contract and exactly how long that contract lasts. In the case studies above neither Paul or Maura even knew they were in renewing contracts and Sinead mistakenly thought she was at the end of a contract rather than at the beginning.

Some contracts are becoming increasingly longer and are attractive because they may offer better monthly rates (24 month and even 36 month phone contracts etc). Enter into a long contract fully aware that you’re stuck with it unless you want to be penalised for leaving early. The bottom line is that there will be no penalties for leaving when your contract comes up for renewal so that’s the time to do it.

2. Contact your provider before considering switching

Contacting your service provider before you even consider switching is the best habit to get in to. They will be able to clarify where you are in the contract. Once you know the date your current contract ends and mark it in your calendar, and if you have to give 28 or 30 day’s notice before quitting, count back a month and make that the red letter day on your calendar. You do your research on better deals before the red letter date to get the timing right.

For example, in Sinead’s case she was able to switch mobile phone provider only by contacting the provider she wanted to move to. That’s well and good and less hassle for the consumer, but bear in mind that due to data protection rules, the original provider cannot provide your details to the company you are switching to. So, the new company can’t advise you that you’ll owe money on your previous account; and your original provider has no obligation to call you to say they’ve received a request to cancel your account and did you know you’ll owe a fortune if you leave.

3. Know the penalties for leaving early

Always find out from your provider what the penalties for leaving / switching early will be. Only then can you make your mind up as to whether it’s worth your while to take your business elsewhere.

Typically you’ll either have to may the monthly recurring charge until the end of the contract period and often you’ll have to give around a month’s notice before the contract is up, otherwise you’ll have to pay a month’s fee in lieu of giving notice. In some cases, such as Airtricity’s fixed term contracts, there is a flat fee.

Whichever it is, you can forget about canceling your direct debit in an attempt to get out of paying. Canceling a direct debit is not cancelling the contract and monies owed on it, so the company can still come after you for money.

4. Ask if you can downgrade or change the deal instead

If you’re looking to save money and the penalties for leaving early are too high, then ask if you can downgrade or change your package instead. In some contracts however, this can be only be done after a certain time period, for example six months after you sign up. But also contact the company to see if they can help.

Plus remember they want to keep you as a customer so even if you’re thinking of switching at the renewal date, it’s worth a call to your provider to see if they can offer you a better deal so it’s worth your while to stay with them.

A word on switching private health insurance

Unlike TV, phone, broadband, some energy contracts and gyms, private health insurance providers Quinn and Aviva do not impose any penalties if you switch from them mid-contract.

However, the VHI does: You’ll have to pay the health insurance levy, calculated on a pro-rata basis, which is €285 for adults and €95 for children (basically so they can recoup it as they’ve already paid it) plus a fee of €50, if no claims have been made. If a claim has been paid on your policy you’ll have to pay the outstanding premium owed up to the next renewal date.

However, note that there will be no financial penalty for leaving mid-contract with the VHI if: the policy holder is made redundant; deceased; moves abroad or moves to a new employer who has a company paid scheme.