Subscription services add up fast. How to avoid ‘stealth costs’ and save money
From streaming your favorite TV shows to dinner kits delivered to your door, subscription services have offered consumers a new level of convenience, even more so since the onset of the COVID-19 pandemic.
You can listen to Adele’s latest album, purchase pet food for your dog and choose fashions curated just for you — all for a monthly free. Those costs can add up quickly, however, and many consumers find themselves paying for services they barely use.
The result is subscription overload, with consumers juggling multiple memberships and the associated fees that often increase. Netflix recently unveiled plans to test a feature that would charge users extra for sharing passwords outside their households, multiple news outlets reported.
The “fleeting bargain” is another way experts say subscribers wind up shelling out extra in “stealth” costs. The special low price you were offered in the beginning may not be what you actually end up paying, said Robert Kerton, an emeritus professor of economics at the University of Waterloo in Ontario, Canada.
“You subscribe at a bargain price, agreeing to a higher price after the initial period,” Kerton told McClatchy News. “The seller can count on a portion of new subscribers planning to terminate — but subject to information overload, they are naively moved to the stealth price.”
Here are tips on monitoring your monthly subscriptions.
Turn off auto-renew
To avoid paying more than you bargained for, experts say it’s best to disable any auto-renew features offered by a subscription service. A 2021 survey by Chase Bank found that an estimated 71% of U.S. consumers waste more than $50 on recurring purchases per month.
That’s a whopping $600 per year.
“When a subscription auto-renews, you are getting charged each month unless you take action to stop it,” Kimberly Palmer, personal finance expert for NerdWallet, told McClatchy News. “So it’s easy to let those recurring costs add up.”
If you sign up for a free trial, Palmer recommends setting a reminder to cancel it before you’re charged. About 60% of respondents in the Chase survey said they had forgotten about at least one recurring payment in the last year.
Consumers looking to trim monthly expenses can also try what Palmer calls a “subscription detox.” This means ending all subscriptions “except for the essential ones.”
However, cutting ties with a subscription service isn’t always an easy process.
Subscription tricks and traps
Some companies have been accused of making it deliberately difficult to cancel services, a practice consumer expert Sally Greenberg called “predatory.”
“Don’t sign contracts that bind you to monthly renewals with no option to cancel,” Greenberg, who heads the National Consumers League, told the Los Angeles Times.
Last year, the Federal Trade Commission announced new rules aimed at preventing companies from tricking consumers into subscriptions using what the agency called “illegal dark patterns.” This includes unauthorized payments and complicated cancellations.
“Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law,” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said in a statement. “Firms that deploy dark patterns and other dirty tricks should take notice.”
If you’ve tried breaking up with your subscription service but are getting the runaround, Palmer suggests filing a consumer complaint at usa.gov, or contacting your state’s consumer protection bureau. Reaching out to your credit card company to stop a payment is also an option.
“You can also cancel your credit card altogether so the charges can no longer process,” Palmer said. “But that’s an extreme step that could have other repercussions, such as stopping payment on other bills.”
This story was originally published March 18, 2022 at 9:26 AM with the headline "Subscription services add up fast. How to avoid ‘stealth costs’ and save money."