Ever sit down to stream your favorite show on Hulu, just to be met with another notice: “Your Hulu subscription will increase by $2 starting next month.” What?! Streaming The Real Housewives of New York sure is getting expensive! This monthly charge (worth it, of course) is just one example of the many “subscription model” expenses that all of us have these days. In fact, America is awash in the recurring charges of subscription-based pricing and billing.
According to CB Insights, more and more retailers and service providers are adopting a subscription-based pricing model because it provides stability for businesses and various benefits to the consumer. The allure of subscription buying (it might be called a “membership” but, you get it) is a draw for consumers who are willing to pay these fees in order to (1) have access to unique goods sold at low prices (think Costco), (2) receive our goods and services automatically and conveniently (think Amazon auto order), (3) get personalized goods and services (think Blue Apron), and (4) experience personalized curation of everything from clothes to food to digital services (think Spotify). With business after business hopping on the subscription-pricing bandwagon it would behoove savvy consumers everywhere to become aware of these types of expenses and manage them smartly.
What is Subscription Pricing?
First thing’s first, what exactly are we talking about here when we say subscription pricing or billing? Subscription-based pricing can be a one-time fee, or fees can be automatically charged on a pre-arranged schedule (annually, or monthly, for example). Some subscriptions expire by their own terms (e.g. at the end of a 12 month period). Others use what is known as a negative billing option that continues the subscription or membership until the consumer takes some proactive measure to cancel it.
One common feature of some subscriptions is that they are offered on an introductory or “trial” basis that provides access to the goods or service for free or a discounted fee for a limited time. Often, these “trial” subscriptions automatically turn into full subscriptions and the consumer is soon charged the full amount of the subscription cost unless he or she takes some proactive measure to cancel the trial subscription before it expires. If the intent is to use the service for free or at a discounted price during the trial period and NOT to pay for longer-term access, consumers need to be fastidious about canceling within the trial subscription term.
Digital Apps and Credit Card Rules
Another feature of some subscriptions is the option to purchase additional features when signing up for basic access. And, sometimes, the print for these added features can be pretty small and easy to miss. If the intent is to buy the basic make and model and not pay for all the bells and whistles, consumers need to slow down and understand the terms of a subscription purchase before clicking on the “Finalize Payment” button.
With the increase in subscription pricing, there’s plenty of applications and third-party providers that can help identify price hikes, spot your unused subscription services, and even “unsubscribe” you from subscription purchases (thank you, helpful friends!). For a list of places to start your search, check out this article from PC Mag, which lists ways to track and manage your paid subscriptions.
Some credit card companies even allow you to cancel recurring monthly subscriptions directly from their apps. For example, Eno, the Captial One digital assistant monitors your account and automatically notifies you about unsual charges, free trials, and monthly bills.
In addition, MasterCard and Visa have recently launched initiatives for merchants who process those card brand transactions to help improve the customer’s experience with subscription billing that involves negative option billing, free trials or introductory offers, and upsells. The card brand rules are similar but differ in some significant areas. Both card brand rules require more up-front disclosure about subsequent transactions that will be processed on the consumer’s Visa or MasterCard card. And, both MasterCard and Visa require merchants to publish their cancellation policies online, but Visa also requires merchants to include a digital, self-service cancellation option, such as completing an online form or sending a text. You can read Visa’s summary of its rules here. You can read about MasterCard’s rules here.
So, yes, there is help out there if you are looking to save some dough on your subscription purchases and to cancel subscriptions that you don’t use anymore. But, there are also some things that we can do as consumers to be informed and save money. Here are some simple ways to stay on top of your statements and manage your subscription expenses like a pro:
Skim your credit card and bank statements:
Catch those sneaky charges and save cash by carefully perusing your bank statements and credit card bills each month. You can only make smart decisions about what expenses are worth it (where would we be during quarantine without streaming services?), and others that are not, if you know what you are paying for. You might have even forgotten you signed up for a subscription in the first place! One easy way to identify them is to look for any consistent costs over several billing cycles from the same vendor on your credit card statement or bank statement. If something seems suspicious about the same $5.99 charge popping up each month, do a little research to see if you can get to the bottom of the charge and possibly get it cancelled.
Build out a budget:
It’s getting harder to find services without some kind of subscription model – but be picky and budget wisely. Create a budget for your subscriptions and stick to it. If you want to purchase a new subscription, you might be forced to eliminate another service first … and that kind of hard decision-making will keep you on the financial straight-and-narrow and also help reduce unwanted subscriptions.
Read the fine print:
Before handing over your billing information, always read the fine print. In particular, be on the lookout for check boxes that are checked and may be agreements to purchase added features or upgrade your purchase. Note all “trial” offer terms and be sure you understand what happens at the end of the trial offer.
Track your trials:
What’s more fabulous than a free trial?! What’s tricky is when you inevitably forget and find yourself still paying for that wine club membership five months down the road. Set up a reminder on your phone to go back and cancel a subscription before the trial expires if you are not interested in the service after trying it out.
Call your service providers and save costs:
Sometimes to save cash, all it takes is a simple phone call! Call your service providers to identify where your charges are coming from and where they can reduce costs to keep you as a customer.
Confirm your cancellations:
Always confirm your cancellations for subscriptions with the provider to ensure you aren’t still somehow opted-in when you thought you had canceled.
Feeling ready to identify all those sneaky costs and cut the fluff? Start by reducing some of the costs associated with your subscription purchases and save cash today.
Looking for more tips? Moneytree covers additional topics on our Financial Living page.