Tempted to give that new streaming service or gym membership a trial run? Be sure to read the fine print. You could be signing up for a lot more than you bargained for.
According to a new survey by CreditCards.com, 35 percent of U.S. adults have set up an account with a service that provides subscriptions or memberships, and in doing so, enrolled in automatic payments without knowing it. The poll, which consulted just over 1,000 people, also found that 48 percent of respondents said they signed up for free trials that automatically renewed without their knowledge, while 42 percent of subscribers found it difficult to turn off recurring charges. And getting refunded for an extension of services you didn’t realize you signed up for may not be an option.
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“In our survey, only about half of those who opted to cancel the subscription got a refund,” Matt Schulz, senior industry analyst at CreditCards.com, told NBC News. “That makes some sense because the company can come back to you and say ‘Well, it's in the agreement that if you don't cancel by this time we will charge you.’”
Gen-Xers and Millennials Take the Bait
The poll found that Gen-Xers were most prone to unintentionally enroll in auto pay services, with 44 percent saying they’d fallen prey. Coming in second were millennials, with 37 percent stating they got locked into auto pay without meaning to, while the silent generation, followed by boomers, were the age groups least likely to be ensnared.
One reason these younger adults may be more likely to unconsciously enter into an auto pay contract than older folks is because they’re more likely to use subscription-based services, period. Recent research by Vantiv and Socratic Technologies showed that 89 percent of millennials have active subscription service (versus 78 percent of Gen Xers and 67 percent of boomers).
Schulz also wonders if this vulnerability doesn’t have to do with the fact that Gen Xers and millennials are too busy to take the time to read the fine print.
“Something that ties all these groups together is that they have their hands full wrestling with jobs and families and kids,” said Schulz. “They have to-do lists that are 100 miles long and they may feel like they don’t have the time to go through an entire contract when they sign up.”
Take the 10 Minutes to Read the Contract
It may be time consuming and tedious, but the onus is on us to take the five or 10 minutes needed to know exactly what we’re getting ourselves (and our credit cards) into.
“This is a good reminder to consumers to take an active role in reviewing what kind of recurring charges they’ve been enrolled in,” said Kimberly Palmer, credit card and banking expert at NerdWallet, adding that it can be all too easy to sign up for a free trial and then find yourself billed a month later.
“I consider myself a savvy person, but it happened to me just the other day with Hulu,” said Palmer. “Usually in order to get a free trial you need to provide your credit card information, and then you may forget to cancel — and then you get billed.”
In addition to reading through contracts before committing to a membership of any kind, Palmer recommends that you review every credit card billing statement make sure there isn’t anything on there you didn’t approve — and immediately dispute it.
Consumers should also set up calendar notifications to go off a few days before a trial is about to expire, giving themselves a heads up to cancel if they want to avoid a possible auto charge.
The Devil Is in the Details, But the Merchant Is No Angel
While it’s important that the consumer do her due diligence when signing up for a subscription of any kind, the company may be at least partly to blame. While merchants can’t get away with blatant dishonesty thanks to consumer protection laws, they can make it pretty difficult for consumers to cancel a service.
“There is no question that some merchants purposely make it confusing and convoluted for customers to cancel subscriptions because they want to keep you as a customer as long as they can,” said Schulz of CreditsCards.com.
Zack Friedman, founder and CEO of Make Lemonade advises consumers not only to read the fine print, but also to hold companies up to high standards of transparency.
“Consumers should demand that companies become transparent with auto-renewal features — and companies should want to be more transparent for consumers,” said Friedman. “Increased disclosure and email and text notifications are a few best practices that companies can consider to create a more transparent business model."
We Like It Even When It’s Sneaky
An intriguing finding of CreditCards.com survey is that while we may enter into auto pay without knowing it, many of us don’t mind sticking around for the long haul.
“Our survey found that approximately nine million consumers kept subscriptions for which they were unwittingly enrolled rather than canceling them,” said Schulz.
Those most likely to let the recurring charges keep on coming were young millennials aged 18 to 26.
Why are we accepting these fees for which we didn’t knowingly sign up? Probably we’ve decided that the membership is worth it, after all. Or maybe we duly blame ourselves for not paying better attention. Or we just really love auto pay, even when it’s sneaky.