Banking, finance, and taxes

How Automatic Payments Take the 'Free' Out of Free Trials

Paul Ausick

Published: August 22, 2017 10:00 am

Last Updated: January 12, 2020 8:55 am

More than a third of Americans are unwittingly enrolled in automatic payment plans that tap their credit card or checking accounts regularly. Nearly 90% eventually shut down these autopay plans, but not without some difficulty.

Autopay plans begin harmlessly enough: consumers are offered a free trial or what they think is a one-time look that ultimately turns into a recurring monthly fee. Often these offers take the form of a negative option or check-off that consumers don’t notice or don’t understand. Some are outright scams while others simply rely on busy consumers not noticing or understanding exactly what they’re signing up for.

According to a new study released Tuesday by CreditCards.com, millennials and GenXers are particularly vulnerable. Some 44% of GenXers and 37% of millennials were most likely to sign up for automatic payments, and GenXers were most likely to complain about the difficulty of turning those payments off.

The survey indicated that about 9% of consumers (approximately 9 million) kept subscriptions and memberships for which they were unwittingly charged rather than cancel them. Young millennials (ages 18 to 26) were most likely to let the recurring charges remain.

Bonnie Patten, executive director of consumer watchdog group Truth in Advertising said:

Anytime a consumer sees the word ‘free,’ they should immediately look for the hook the company is laying out in front to catch them. ‘Free’ rarely actually means free. Almost inevitably, if consumers are being offered a free trial, it’s so the company can get their credit card information and enroll them in one of these negative option offers.

The director of the U.S. Federal Trade Commission’s (FTC) enforcement division, James Kohm, noted that major online subscription services like Netflix, Spotify and Amazon Prime “are unlikely to engage in these kinds of deceptive practices due to their popularity and their reputations.”

While sorting out the legitimate offers from the scams is tricky, consumers should be skeptical of any offer that asks for payment information in order to get the free trial started. Read the fine print on these very carefully and be sure you understand what you’re getting. Patten noted:

What we’re seeing is that they’re not making it easy for a consumer to tell that they’re going to be put into a negative option offer. For example, they may use a pre-checked box, or the ability to decline a negative option offer is at the bottom of the page, in a smaller font and a color that’s not very visible.

If you do get caught in an autopay trap, you may dispute the charges with your credit card provider or bank. To cancel a one-time or recurring charge, contact the bank with the name of the person or company receiving the payment and the dollar amount of the payment.

Methodology: CreditCards.com commissioned Princeton Survey Research Associates International to obtain telephone interviews with 1,002 adults living in the continental United States. Interviews were conducted by landline and cellphone in English and Spanish from August 3 to 6, 2017. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error is plus or minus four percentage points.