Credit Cards

It’s time to put an end to all free-trial auto-renewals

By: Lisa Coxon on January 18, 2019

Mastercard just introduced a new rule that will require merchants offering free trials of physical products to get the cardholder’s approval before automatically renewing their subscription once the free-trial period ends.

It’s a good first step, but the new rule doesn’t apply to digital subscriptions, like app or website subscriptions. And that’s a big miss.

Digital subscriptions are everywhere. So many of us sign up for free trials of various apps and websites (looking at you, Amazon Prime) that, if left ignored, can easily result in unwelcome charges.

For physical products, such as skincare and healthcare items, Mastercard says “Merchants will be required to send the cardholder – either by email or text – the transaction amount, payment date, merchant name along with explicit instructions on how to cancel a trial.”

If the consumer decides to move forward with the paid subscription after the free trial, merchants are still required to email or text cardholders a receipt for each subsequent payment with the same information and instructions on how to cancel. And all charges that appear on the cardholder’s monthly statement must include the merchant website URL or the phone number of the store where the purchase was made.

Free trials are a tricky trap. They’re a great way for companies to hook potential customers, but they often create a headache for consumers. You sign up for your free trial, which might last anywhere from a couple weeks to even 30 days, but unless you remember to cancel before the renewal date, your card is automatically charged.

The onus, then, is on the consumer to remember to cancel and not the company to ask for the consumer’s permission to start charging them. And of all the things we have to remember day-to-day — send those emails, book that appointment, pick up the kids from school — cancelling a free trial doesn’t exactly top the list.

At the beginning of 2018, I signed up for a discounted year-long trial for the Headspace app, which helps facilitate meditation. There was no way I was going to magically remember to cancel it in a year’s time, and I knew how angry I’d be with myself if my credit card wound up being charged, so I actually had to jot down the auto-renewal date in my calendar.

Free trials have an even darker side, too. According to the Better Business Bureau, at least 37,000 people have been scammed in the past three years by free-trial offers that weren’t really free. The Bureau has called on credit card companies to do more to protect consumers from these scams.

“We think they could do more for the victims in terms of a greater sense of assistance in helping them get charge backs,” Karla Davis of the Better Business Bureau told Global News last week. “Out of the 56% [of consumers] that have requested charge backs, 44% were not approved.”

People don’t really have the time or the mental bandwidth to constantly be remembering to disable automatic renewals after every free trial. It makes for an onerous process that is meant to make you forget to do it. Mastercard is off to a good start with its new rule around free trials for physical products. But it (and other card providers, as well as banks) can — and should — go one step further. Merchants shouldn’t be able to take advantage of our poor memories in the digital world, either.