Free trials can lead to surprising credit card charges

Have you ever been struck by a surprising credit card charge for a streaming service, meal delivery set, or treat box for your dog? You’ve got plenty of company, according to a new Bankrate survey.

With many consumers juggling multiple video streaming services and other subscriptions, surprises on credit card bills are now commonplace. Bankrate’s survey of 2,497 U.S. adults found that half (51 percent) of U.S. adults who had a subscription or membership account incurred unwanted charges at some point.

These stealth charges can easily happen if you accidentally join a service, forget to cancel a free trial, or pay for an annual membership that automatically renews. Such costs can add up, especially if you don’t see them right away. A Chase survey found that 71 percent of Americans waste more than $50 a month — that’s $600 a year — on unwanted subscription fees.

This happened to Ann Martin, CreditDonkey’s director of operations. She was subscribed to a $10 a month makeup club without her knowledge. The product did not arrive at her home, so it took a while for the allegations to be noticed. Martin contacted her credit card company and had the more recent charges removed, but had to pay some older charges.

“That’s my fault for not recognizing it sooner, but I was very pleased with my credit card’s response to the issue,” she says.

Younger consumers hit harder by recurring costs

Millennials and Gen Zers are the two generations that bear the brunt of the problem of unexpected subscription costs, the poll shows. More than half of those under the age of 42 said they have experienced unwanted recurring costs:

  • Millennials (aged 26 to 41) – 58 percent
  • Gen Zers (ages 18 to 25) – 57 percent
  • Gen Xers (aged 42 to 57) – 48 percent
  • Baby Boomers (aged 58 to 76) – 45 percent
  • Silent Generation (aged 77 and older) – 43 percent

Why? Younger consumers may tend to subscribe to more services with recurring costs. A recent PCMag survey of subscription services by generation found that 80 percent of Gen Zers subscribe to four of five common subscription categories: video streaming, music, food, miscellaneous (such as clothing or VPN subscriptions), and beauty/wellness, compared to two types for Gen Xers and one type for boomers.

The survey also found that certain types of subscriptions are more popular with Gen Zers and millennials than older generations, for example, game subscriptions, subscription apps, subscription boxes (BarkBox, Dollar Shave Club, Stitch Fix, etc.), meal delivery, and meal packages (Blue Apron, HelloFresh etc.). But store subscriptions and membership organizations count more Gen Xers and boomers as customers.

The Bankrate survey found that recurring costs are a problem for all income levels. These costs affect nearly 6 in 10 (59 percent) households earning $100,000 or more per year, the poll found, as well as 51 percent of households earning $50,000 to $99,999 and 49 percent of households earning less than $50,000 per year. Earn $50,000 a year.

“Unwanted subscription fees are a major pain point for consumers,” said Ted Rossman, senior analyst at Bankrate.

Pandemic increases unexpected subscription costs

Video streaming services, subscription boxes and other recurring cost services gained popularity before the COVID-19 pandemic hit, but the pandemic may have had a “amplifying effect” on the issue of surprise costs, Rossman says.

The survey found that half of consumers say they now subscribe to a video streaming service, and 41 percent have a membership to a shopping service such as Amazon Prime or Groupon Select. Other popular services include:

  • Membership organizations (e.g. AAA, Costco, or a gym) – 31 percent
  • Audio streaming (Apple Music, Spotify etc.) – 23 percent
  • News (New York Times, Wall Street Journal, etc.) – 12 percent
  • Gaming plans (PlayStation Now, Xbox Live, etc.) – 12 percent
  • Food delivery (DoorDash DashPass, Instacart Express) – 10 percent

Of those affected by unwanted charges, 55 percent had experienced it before the pandemic and 45 percent had experienced it since the COVID-19 pandemic was declared in March 2020 – a significant percentage within a much shorter time frame.

During the pandemic, many consumers have signed up for food delivery services as well as “online sewing classes and things like that to help them get through the pandemic,” said Linda Sherry, director of national priorities for consumer action. Then she says many never canceled or simply forgot they signed up in the first place.

“It’s no surprise that people pay for things they don’t want or use,” she says.

Canceling unwanted subscriptions is not always easy

Many companies are deliberately making it harder to cancel subscriptions, says Joshua Browder, CEO of DoNotPay, which helps consumers fight unwanted charges and other issues. For example, he says Netflix has a “no refund policy,” Hulu takes away the rest of your free trial if you cancel early, and some gyms let you show up in person to cancel.

The survey found that 34 percent of consumers with a subscription or membership account say it’s difficult to cancel or disable automatic payments. Of these, 10 percent say it is very difficult.

In general, older generations find it more difficult to cancel subscriptions. The following percentages of each generation say it is very or somewhat difficult to cancel a subscription service or membership, the poll found:

  • 41 percent of boomers
  • 33 percent of Gen Xers
  • 32 percent of Gen Zers
  • 28 percent of millennials

The good news: Visa and Mastercard have both introduced “consumer-friendly policies” that require merchants to more clearly disclose terms and conditions for free trial and recurring payments and instructions on how to cancel, Rossman emphasizes. However, not all companies follow the rules.

How to Avoid Unwanted Credit Card Fees for Subscriptions

Do you want to avoid falling victim to unexpected subscription costs? Here are five tips to avoid this common pitfall:

  • Track your subscriptions. Go “old school” and use a spreadsheet or similar tool to track subscriptions, Sherry recommends. Record when and how you signed up. For example, did you purchase a streaming subscription directly or within your Amazon Fire Stick or Roku? Capturing this information makes it less frustrating to cancel, she says.
  • Avoid the free trial. Sign up for a free trial? Set a calendar alert to ping you a few days before the trial ends. Or use a virtual credit card for free trials, Browder recommends. You may be able to set a custom expiration date before the free trial ends so that the company can’t charge you.
  • Turn off auto-renewal. Have you paid six months or a year for a service you really want, like a weight loss plan or a meditation app? Turn off auto-renewal so you won’t be surprised by months of charges. You may be able to do that within your subscription account (for example, Lumosity offers instructions on how to turn off automatic renewals.) Or you can pay with a payment service like PayPal and then log into that account to get permission for future charges.
  • Use your credit card company’s tools to manage subscriptions. Chase has introduced a new tool that makes it easy to track where your credit card information is stored. And with the Capital One Eno browser extension, you can get a reminder before a free trial expires. “Start with your bank or credit card and ask what tools are available to you,” Sherry says.
  • Try to remove the charge. Have you been adopted yet? Try contacting customer service to see if the company will remove the charge. If they refuse, contact your credit card company for assistance. “Consumers may need to quickly turn to their credit card company if there is a problem,” Browder says.

It’s good to plan now to avoid unwanted subscription fees, as it doesn’t look like the problem will go away anytime soon. “As streaming platforms and other subscription services continue to grow in popularity, this will remain a significant issue for quite some time to come,” Rossman said.

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