Let’s say you want to get a cell phone, a student loan, a credit card, or rent an apartment. Chances are you will need to sign a document called a contract. It’s easy to sign a contract and there are things you need to consider before signing on the dotted line. Contracts can have a major impact on your financial life!
What are contracts?
A contract is a formal document that requires a signature in order to receive a service or to purchase an item. It outlines the expectations and rules or "terms and conditions". Your apartment lease, for example, guarantees you a place to stay in exchange for a commitment to pay rent on a certain date each month. The contract, or lease also outlines how you give notice and what happens if you damage the place.
A contract is a legal agreement that can have serious consequences such as:
- There are penalties when you don’t follow the rules or terms and conditions
- They are legally binding documents – yes you could get sued when you break a contract!
- Contracts often have fixed timelines (a two-year cell phone plan, a one year lease)
- If you don’t honour your contracts it can and most probably will affect your credit rating – see the learn about credit info page
- The fine print often contains unexpected costs.
Check out the know your rights as a tenant info page!
Know what you’re signing!
It’s easy to get overwhelmed when you see these legal documents. Read the small print…something you are often told, but who has the time? Make the time! The small print is where the additional costs will be listed.
Many contracts have hidden costs built into them that you see when you get your first monthly bill.
- The interest rate of the loan or credit card (credit page)
- The length of time of your contract
- Service charges
- Monthly costs
- Administration fees
A zero dollar cell phone looks great at first glance. You pay nothing up front, sign a contract, and get a shiny smart phone in your hand the same day. However, sometimes the cost isn’t as clear as a salesperson or ad might make it seem.
Prepaid cell phone plans (sometimes called pay and talk) are a great way to get minutes and texting without a commitment. They are often way cheaper than a monthly contract with data!
Shop around! Check out this website that compares cell phone plans for the major companies.... do your homework before you make your decision!