Yes, people often forget to cancel their monthly subscriptions — and the costs add up
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Pay-by-the-month subscriptions are increasingly popular. But research suggests people often keep paying long after they intend to.JGalione / Getty Images -
The FTC is considering a new rule that would make it as easy to cancel monthly subscriptions as it is to sign up.Chris Delmas / AFP via Getty Images
Soccer fan Neale Mahoney's goal when he subscribed to NBC's Peacock streaming service last year was to watch a single season of the Premier League. But he wound up paying for extra time.
"When I signed up last fall, I intended to cancel at the end of the season in May," Mahoney recalls. "But of course when it came to the summer, I forgot to cancel and I realized I paid for three extra months."
It's a familiar mistake, given the explosion of subscription services in recent years. Americans are increasingly signing up to buy everything from bottled water to razor blades on a pay-by-the-month basis — but often forgetting to cancel when the subscriptions are no longer needed or wanted.
"I get coffee beans delivered from my favorite roaster in North Carolina by subscription," Mahoney says. "That is typically convenient. But I go on vacation and I have coffee piling up on my doorstep."
Mahoney, who's an economist, wanted to figure out how often people are paying for subscriptions they no longer want. Are monthly charges piling up for magazines and food box deliveries that customers would gladly cancel if given the opportunity?
He and two colleagues at Stanford and Texas A&M University scrolled through millions of anonymous credit card records, and they discovered a kind of natural experiment.
"The a-ha moment for us," Mahoney says, "was we realized that when your credit card expires or you lose your credit card and get a new one in the mail, you're going to get an email from all the companies where you have a subscription that says, 'Can you log in again and update your payment information?'"
When that happens, and people have to make an active decision about whether to renew a subscription, they cancel about four times as often as during other months.
On average, about 8% of customers cancel during months when they are asked to actively renew their subscription, compared to about 2% who cancel during other months.
The difference is especially pronounced for services that are easily overlooked, such as credit monitoring.
"Ten minutes after you signed up, you may never remember," Mahoney says. "Until a year later or two years later and you're looking through your credit card statement and say, 'What is this line?'"
Easy money
Consumer advocates suggest that businesses are profiting from customers' forgetfulness and inertia.
"I'm sure I'm paying for things I shouldn't be paying for," says Sally Greenberg, CEO of the National Consumers League. "It's a cash cow for companies."
Even when customers try to cancel, they sometimes run into roadblocks.
Deb Shelby says when her home security system stopped working, it took seven phone calls before the company finally stopped billing her.
"They insist on making money on people who don't have the stamina to fight back," says Shelby, who lives in Jericho, Vt. "I actually have the stamina to fight back. It took me six months to get it done. I think a lot of people just give up."
Shelby says she's faced similar challenges canceling Internet service and a satellite TV network.
The Federal Trade Commission gets thousands of complaints like this every year.
The commission, which polices unfair and deceptive business practices, is considering a new rule that would require companies to make it as easy to get out of a monthly subscription as it is to sign up. The so-called "click to cancel" rule would also require businesses to send customers an annual reminder.
Periodic reminders
Some trade groups are fighting the proposed rule, saying it could stifle innovation and limit customers' choice.
For shoppers who regularly use a product or service, subscriptions can offer convenience and valuable discounts. And economist Mahoney acknowledges it might be annoying if consumers had to actively renew a subscription every month.
Still, he argues a periodic reminder — perhaps every six months — could help cut unwanted payments in half.
"There are some people who tend to be more financially organized and they may set reminders," Mahoney says. "And there are some people who are busy and have other things going on in their life and they're more prone to making mistakes."
Mahoney tries to be organized with his own finances, especially after doing this research. But now that a new soccer season is underway, he can't promise he'll remember to cancel his Peacock streaming service once the last whistle has blown.
"If anybody should know this is a problem, it should be me," Mahoney says. "But I also think I understand myself. I will continue to overpay for things, but hopefully only overpay for a couple of months, not for a couple of years."
Mahoney notes a new cottage industry has sprung up to help people comb through their credit card bills and stop unwanted payments.
The services are usually marketed as — you guessed it — a monthly subscription.
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Transcript
MICHEL MARTIN, HOST:
Americans sign up for a lot of monthly subscriptions these days, and new research shows they often keep paying often long after they stop using the product or service. And if you've ever looked at your credit card bill and wondered, why am I still paying for that, you're in good company. NPR's Scott Horsley tells us more.
SCOTT HORSLEY, BYLINE: Subscription-based businesses have been around for a long time, but thanks to the internet, they've really ballooned in the last decade. Stanford economist Neale Mahoney says you can now sign up to buy everything - from streaming television to razor blades - all by paying a monthly fee.
NEALE MAHONEY: I get coffee beans delivered from my favorite roaster in North Carolina by subscription. That is typically convenient, but I go on vacation, and I have coffee piling up on my doorstep.
HORSLEY: And sometimes, you don't even get that visual reminder that a subscription has overstayed its welcome. Last year, Mahoney signed up for NBC's Peacock streaming service so he could watch Premier League soccer on TV.
MAHONEY: When I signed up last fall, I intended to cancel at the end of the season in May. But, of course, when it came to the summer, I forgot to cancel and I realized, you know, I paid for three extra months.
HORSLEY: Mahoney and his colleagues wanted to figure out how often people are paying for subscriptions they no longer really want - magazines or food delivery. They would cancel if given the opportunity, rather than just letting the monthly payments pile up on their credit card. They scrolled through millions of anonymous credit card records and discovered a kind of natural experiment.
MAHONEY: The aha moment for us was we realized that when your credit card expires or, you know, if you lose your credit card and get a new one in the mail, you're going to get an email from all of the companies where you have a subscription that says, can you log in again and update your payment information.
HORSLEY: And when that happens, when people have to make an active decision about whether to renew a subscription, they cancel four times as often as during other months. Sally Greenberg, who heads the National Consumers League, says that's why a lot of businesses don't ask. They just keep charging customers automatically month after month.
SALLY GREENBERG: I'm sure I'm paying for things I shouldn't be paying for. And it's a cash cow for companies.
HORSLEY: Even when customers try to cancel, they sometimes run into roadblocks. Deb Shelby says when her home security system in Jericho, Vt., stopped working, it took seven phone calls before the company finally stopped billing her. She's faced similar challenges canceling internet service and a satellite TV network.
DEB SHELBY: Everything is all about profit, and they insist on making money on people who don't have the stamina to fight back. I actually have the stamina to fight back. It took me six months to get it done, but I think a lot of people just give up.
HORSLEY: The Federal Trade Commission gets thousands of complaints like this every year. The commission, which polices unfair and deceptive business practices, is considering a new rule that would require companies to make it as easy for customers to get out of a monthly subscription as it is to sign up. Businesses would also have to send customers an annual reminder. Some trade groups are fighting the proposed rule, saying it could stifle innovation and limit customers' choice. Some subscriptions do offer discounts, and economist Mahoney acknowledges it might be inconvenient if you had to actively renew every month. Still, he argues a periodic reminder - maybe every six months - could help to cut unwanted payments in half.
MAHONEY: There are some people who tend to be more financially organized, and they may set reminders. You know, and there are some people who are busy, have other things going on their life, and they're more prone to making mistakes.
HORSLEY: Mahoney tries to be organized with his own finances, especially after doing this research. But now that a new soccer season's underway, he can't promise that he'll remember to cancel his streaming service once the last whistle has blown.
MAHONEY: If anybody should know this is a problem, it should be me. But I also - I think I understand myself. I will continue to overpay for things but hopefully only overpay for a couple of months and not for a couple of years.
HORSLEY: Mahoney notes a new cottage industry has sprung up to help people comb through their credit card bills and stop unwanted payments. The service is usually marketed as a monthly subscription.
Scott Horsley, NPR News, Washington.
(SOUNDBITE OF MONSTER RALLY'S "MOONGLOW") Transcript provided by NPR, Copyright NPR.
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