If I hadn’t decided to browse through the promotions tab in Gmail one day last week, I probably would have missed it: a receipt from PayPal for an $85 payment to the Apple App Store. The charge was unfamiliar, and the receipt contained little information, so I had to call Apple to resolve the mystery.
It turned out the fee was for a language-learning app my daughter had downloaded and forgotten to uninstall before its two-week free trial period expired. This situation is not uncommon; nearly half the consumers surveyed by CreditCards.com said they had signed up for free trials that automatically renewed without their knowledge.
The experience got me to wonder what other subscription charges were quietly posting to my credit card every month. I did a quick back-of-the-envelope inventory, jotting down all the periodicals, streaming media services, software, and cloud applications that I could think of, along with the estimated costs. I stopped when the annual total exceeded $2,500.
I’m not alone in being a little taken aback at how much subscriptions were costing me. Consulting firm West Monroe recently released the results of its survey of 2,500 U. S. consumers about their subscription spending. Among the findings:
- People spend an average of $273 on subscription services each month, or more than $3,200 per year. That’s up 15% over 2018.
- Most people haven’t a clue about how much they’re spending. In fact, their average estimates were off by an even wider margin than they were in the same study three years ago, with 46% of respondents underestimating their subscription costs by more than $200 per month.
- Not a single person who was surveyed was aware of their actual monthly spending on subscription services.
- Most people described themselves as “happily hooked” on their services, with subscribers to books, streaming music, and pet supplies the happiest. A relatively small number said they were unhappy, led by fashion subscription boxes (24%) and digital newspapers and magazines (20%).
Hooked on subs
Subscriptions are now the norm in our as-a-service world. Financial services firm UBS predicts that the global “subscription economy” will more than double to $1.5 trillion by 2025. Zuora, which makes software that enables companies to offer subscriptions, says subscription spending has grown six-fold over the last nine years, and subscription-based businesses grow five to eight times faster than those that deal in more conventional unit pricing.
It is astonishing how many goods and services are now available this way. You can buy meals, groceries, car washes, personal training regimens, razors, toothbrushes, and dog food by the month. My home security provider charged me nothing for the equipment or installation to protect my house knowing that it has permission to dip into my bank account for $60 per month for as long as I live there.
Businesses love subscriptions. The model eases sticker shock by amortizing costs over months so that the cost appears almost trivial, enabling those “cup of coffee per day” promotions. Subscriptions simplify upselling and cross-selling by lowering cost objections and make it easier to onboard customers with the promise that they can quit at any time.
The dirty little secret is that most customers don’t quit. Rather, the monthly fees become background noise on their credit card statements, which many people don’t read anyway. Stated another way, if you drank 20 cups of coffee per day, you would probably notice the cost (or at least the tremors). Most of us are drinking 20 cups per day right now without giving it a thought.
Naturally, technology has an answer. “Freemium” apps like Bobby and TrackMySubs keep a list of your subscriptions and notify you of renewal dates so you can cancel those you don’t want to keep. Trim and Truebill take a more activist approach. Both offer concierge-like functionality that can cancel services on your behalf or, in Truebill’s case, negotiate more favorable fees. Be aware that you do have to provide these services with some personal information and account accesses to get the full value.
You don’t need an app to get a handle on pricing. Start by never choosing an auto-renew option unless you’re absolutely positive you want to keep the service for a long time. If you initiate a free trial, make a note in your calendar to cancel it before it expires.
Don’t make the same mistake I did; be sure to enable the Ask to Buy feature in Family Sharing on your Apple devices to require any purchases made by your offspring to be submitted to you for approval. If you’re an Android user, set up your Google Play Store account to require authentication.
Finally, it doesn’t hurt to occasionally cancel even the subscriptions you like. Some will offer you attractive retention offers that can save you money. Although in my case, Apple’s App Store didn’t seem interested.
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