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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