Subscriber Beware: The Trouble With Recurring Charges

Chandler didn't like going to the gym, and he didn't like paying for his gym membership every month either. Yet, month after month, he failed to cancel his membership.

When asked why, he answered: "You don't think I've tried? You think I like having $50 taken out of my bank account every month? They make you go all the way down there! Then they use all these phrases and peppiness to try to confuse you."

Chandler is a character from the classic TV show "Friends," and though it's been nearly 20 years since the episode about his unused gym membership aired, it resonates more than ever today as consumers are swamped with recurring charges that can burden their budgets.

Some, like Chandler, just don't want to pursue the often inconvenient process of canceling a membership or subscription. Others simply forget they're paying a monthly charge, overlooking the telltale line items on their credit card accounts or banking statements. While that may be bad for consumers, it's great for businesses, which have encouraged the proliferation of subscription models.

"Companies no longer want to sell you an individual item. They want to sell you an ongoing relationship where they can download money from your credit card every month," said Bob Sullivan, the author of the book Stop Getting Ripped Off. "That's a better business model for them so everybody's pushing that way."

Thomas Smyth, the CEO and co-founder of Trim, puts it more diplomatically.

"In general, companies use subscriptions to reduce the 'friction' of payment, making it more likely that their customers will stick around," said Smyth, whose company spots recurring charges on bank and credit card statements and offers to cancel subscriptions on consumers' behalf.

The companies with recurring charges most commonly canceled by their customers, it turns out, fall into one of five categories, according to data released by Trim and published by The New York Times in early 2016. Here they are.

Credit Reporting Companies

Consumers can get free credit reports by visiting AnnualCreditReport.com, which provides customers reports from the three major U.S. credit bureaus. (For more info, read this.)

But not everyone is aware of that free option and sometimes consumers may find themselves signing up for paid services, such as credit monitoring, without fully comprehending what they're signing up for. Before they know it, they're being charged $10, $20 or $30 a month for a service they never intended to get in the first place.

Health Clubs

Consumers may sign up for gym memberships with the best of intentions but then, like Chandler from "Friends," they let their membership card collect dust because it's simply too inconvenient to cancel. Instead of canceling over the phone, for instance, they may have to visit the club in person and sign multiple forms. The issues has irked so many consumers that some states have passed laws making it easier for members to cancel, Sullivan said.

Video and Audio Entertainment

Say you're suddenly obsessed with a new musician, or there's a movie you're dying to see. You might sign up with a music or video streaming service to sate your cultural craving...and then you might never take advantage of that service again, but you keep getting billed for it. Or you're offered a free trial of an entertainment service, and once the trial runs out, you forget to cancel, leaving you stuck with bills for months to come. The latter is especially common when it comes to satellite radio services, which are often offered on a free trial basis to consumers who purchase new cars. Consumer complaints related to such services, Sullivan said, have resulted in lawsuits.

Newspapers and Magazines

Sometimes consumers wind up with newspaper and magazine subscriptions they never wanted because they ended up subscribing as part of a sweepstakes or giveaway. In other cases, they subscribe because they do intend to read the publication, and then never do, letting issue after issue pile up on their coffee tables.

Or they might receive a complimentary issue of a magazine in the mail, followed by a few more issues that they're billed for. Sullivan said in those cases, in particular, it's important to remember that, "as long as you haven't given [the publication] your payment information, you don't owe them any money. You don't have to pay."

Why don't consumers just cancel unwanted publication subscriptions in general? Sullivan believes the consumers don't feel it's urgent to cancel because such subscriptions are relatively inexpensive. "You'll say, 'Is it really worth the call to save $9 a month? Probably not. I'll wait till next month.' And then another month goes by," Sullivan said.

Various Digital Services

You might have forgotten about the website that you started back in college, but your web host hasn't. The company that provided server space for your site could very well still be charging you for its services even if you haven't touched your site in years.

Wifi services have also gotten a bad rap, with one service being subject to a class-action lawsuit after it was accused of enrolling people in subscriptions without notifying them, the Times reported. (The suit was later settled.)

You might be getting more for your money with subscriptions to software. In the past, consumers typically bought certain software, such as word processing programs, outright. Today, software providers prefer you subscribe in order to receive software updates and security patches on a regular basis.

While few would argue about the merits of getting a more secure product, not everyone is necessarily in favor of the other updates that come with software subscriptions. "I'm happy with 10-year-old word processing software and I wish they'd just leave it alone," Sullivan said.

Motivating Yourself to Cancel

So how do you keep tabs on subscriptions and ensure that useless ones don't weigh down your budget? Sullivan recommends dedicating time each month to reviewing your credit card and banking statements. If you see a number of subscriptions you want to cancel, pick one to take care of that month and steel yourself for the phone calls or paperwork it will take to make it happen.

Need motivation? Consider a monthly subscription that costs $20. If it takes you half an hour to cancel that subscription, you've saved yourself $240 for the year...but another way to think about it is that you've earned $240 for just a half hour of work.

"The biggest problem of all is that it is way easier to sign up for these things than it is to cancel them," Sullivan said. But cancelling, he said, "is really worth the time."