Automatic renewals easy to forget, sometimes hard to turn off
Quick – how many recurring charges do you have on your credit cards? One? Ten? Can you name them all?
Not all recurring subscriptions are bad, provided you know what you are paying and what you get in return. Things we used to buy are now sold by subscription, from software to music to movies. Sometimes you can’t even buy a product or service without signing up for a recurring charge on your credit card.
Yahya Mokhtarzada, co-founder and CEO of Truebill, a free app that helps consumers find, track and manage their paid subscriptions and other recurring bills, is a subscription convert. “I get toothbrushes and toothpaste as a subscription,” he says. “Why should I have to deal with running out of them or running to the store to buy them?”
The downside of recurring subscriptions is they’re so easy to sign up for and even easier to forget about, leaving you paying those bills for months or years before you realize you haven’t used the product or service for a long time.
Often, we have no one to blame but ourselves. We sign up for a service, never cancel, and then fail to carefully read our statements every month.
To make matters worse, many services do not notify consumers before they are billed again – the better to stay under the radar and quietly keep getting paid. And when you go to the merchant’s website to cancel, it can seem harder, if not almost impossible, to figure out how to unsubscribe.
Mokhtarzada says the most common unwanted recurring charges they see with the Truebill app are for credit score services. “There are some really bad actors in this field that are pretty sneaky about signing you up. For example, Fabletics sells workout clothes on a subscription. They bill you every month, but they don’t ship anything unless you log in and pick something out. People get billed for six or eight months, and there’s no package to remind them.”
For most of us, living within our means is hard enough. Even small recurring charges can eventually do serious damage to your finances. It’s like having a little hole in your pocket or purse. Eventually, you’ve left a lot of money behind!
“I got burned with an unknown subscription myself,” says Mokhtarzada. “I was looking at my credit card statement one day, and I saw a charge for in-flight Wi-Fi, which was strange because I hadn’t flown in over a month. I realized I’d been paying $40 a month for 14 months, which is kind of embarrassing to be honest.”
If you’d like to get recurring charges under control, or at least find out if you’re paying for services you’re unaware of, follow these steps:
1. Make a list of recurring services you know you pay for.
It’s a good idea to start the list without looking at your credit card bills. If a service is important to you, you should remember it. If not, it’s suspect.
Then look at your card statemnents and add any recognized or unrecognized recurring charges to the list. Be sure to look back as far as 12 statements to catch any charges that bill annually. If you have multiple cards, check them all, including your debit card charges if you tend to use debit instead of credit.
Make your list easily accessible and repeat the exercise a couple of times a year. One advantage of keeping a list on a spreadsheet is that you can automatically add up how much you are spending every month on recurring charges.
The merchant name on your credit card statement does not always match the service or product you are getting. If you can’t tell what a service is by the single line description on your bill, search the description on the internet, call your credit card company, or if there’s a telephone number next to the service provider on the bill, call that. If you’re a frequent Amazon customer, you can check and update your subscriptions and repeating orders through your online account
Next time you think about adding yet another product or service to the list, being able to see the growing number of charges you have to pay every month may give you pause. You may be better off buying a DVD, for example, than signing up for another video streaming subscription. For better control of your finances, try to keep your number of recurring charges to a minimum.
2, Cancel unneeded or unwanted recurring charges.
Call, write or go to the company website and put a stop to charges before they have a chance to bill you again. Take note of the date you canceled, just in case there is a dispute later.
If you believe not all of the charges were authorized, for example, if you are sure you canceled, but you’re continuing to be billed anyway, contact the merchant again. If they don’t make it right, file a dispute with your credit card company.
Don’t forget to discuss charges and cancellations with family members to prevent them from reactivating the service accidentally.
3. Consider putting all recurring charges on one credit card.
Half a dozen credit cards with recurring charges spread among them is too hard to keep track of. Put any recurring charges on one card, which makes it easier to spot something that shouldn’t be there. If you have a few cards, you might even want to use one card just for recurring charges and automatic payments.
4. Don’t keep the same card number forever.
It’s handy to have the same card a long time, perhaps so long that you’ve memorized the number and security code. However, keeping the same card number too long is a security hazard. Credit card companies occasionally change your card number without you asking. Instead of fretting about the inconvenience, consider it a benefit. By the time you’ve had a card for several years, it’s simply been in too many hands, and the number has been entered in too many databases.
Don’t assume that changing your credit card number will wipe your card clean of recurring charges, however. Sometimes that works; sometimes it doesn’t.
Ellen Cunningham, marketing manager for CardFellow, says, “It depends on whether the company taking the credit card uses a processor that offers what’s called automatic card updating. With automatic card updating, the processing company works with credit and debit card companies to automatically update customers’ card details when cards expire or change due to being reissued.”
Automatic card updating is becoming more common. If changing card numbers got rid of recurring charges for you in the past, that doesn’t mean it will continue to do so in the future.
Jeremy Hill, senior quality assurance engineer at Vonage, cautions that you shouldn’t use changing your credit card number as a shortcut to get out of recurring charges – even if it seems to work in the short run. “Recurring credit charges constitute a contract. If the company continues to fulfill its end, you are obligated to continue paying unless the original contract stipulates otherwise,” says Hill.
Changing your number may stop the charges, and if they are small, the company probably won’t pursue you. In some cases, however, you may find yourself still owing a bill – plus late fees and interest. “Many adult websites pursue customers in hopes they will be so embarrassed they won’t confess to their bank what they do online that they will provide other means of paying,” says Hill.
Cunningham’s personal experience comes from a gym membership. “When I signed up for a gym near my office, I had to put a card on file for monthly membership fees,” she says. “Life got busy, and over time I used the gym less and less until I wasn’t going at all. Around the same time, my bank issued me a new card with a chip. It had a different number and expiration, and my gym membership charge didn’t transfer over.
“Since I wasn’t using it, I didn’t notice. However, the next month, I got a bill in the mail as well as a phone call from the gym. They stated that my recurring payment had been declined, and imposed a late fee on top of it. They informed me that continued nonpayment would send the bill to collections.”
Fortunately, by then Cunningham was past the original terms of the contract, and sent a certified letter ending her membership. She did not give the gym her new card details. If the gym used a processor that offered automatic card updating, the payment would have gone through as usual.
Consider using an app or website to help you find and cancel unwanted recurring charges.
After Mokhtarzada made the embarrassing discovery that he’d been paying $40 per month for a service he didn’t use, he searched online for a tool that would show him everything he was paying for on an ongoing basis. He didn’t find what he wanted, so he and his brother decided to build it themselves.
When they rolled out the prototype, they were surprised to discover most people who tried it found at least one service they were paying for that they didn’t need or want.
Mokhtarzada and his brother included a feature in their app to cancel subscriptions. He says, “If it’s easy to sign up online, it should be easy to turn it off as well.” Mokhtarzada says that 25 percent of people who sign up ask them to cancel at least one subscription. Those who do save an average of $500 per year, he says.
“There’s also AskTrim.com, which will actually send you a text message. You only have to reply which accounts you want to cancel, and they’ll cancel them for you,” says Mokhtarzada.
Using a personal finance site, such as Mint.com or YNAB.com, can also help identify recurring charges so you can decide which ones to cancel, so you have more money in your budget for things you really do want and need.
See related: Beware autorenewals’ endless charges, Buy now, pay forever: Beware negative option plans