Free Product Trials (the Devil IS in the Details!)

Have you every ordered a free product trial online and been asked for your credit card information? Well, if you’re not reading the fine print, it could be costing you.   The Federal Trade Commission has seen an increase in complaints about negative-option marketing, which is the practice of offering something for free and burying recurring fees in the fine print.  These fees do not require you to ‘do anything’.  In fact, it’s quite the opposite.  These fees kick in when you fail to perform as action – such as indicating you do not want to subscribe to their service.  This aggressive marketing ploy is costing consumers millions of dollars every year.  What can you do to protect yourself?  We’ll tell you.

First, let’s look at how negative-option marketing works.  Let’s say you sign up for a credit monitoring service that offers a free credit report.  When you sign up for your free report, the site requests your credit card information.  Down deep in the fine print, the vendor discloses that if you don’t cancel your free trial, you’ll continue to receive additional reports or offers from their third-party affiliates.  This, of course, is provided at a monthly fee – one which you may have no idea is being charged.  Sure, it’s misleading, but unfortunately it’s not illegal.  In fact, many marketers use this ploy.  Everyone from teeth-whitening marketers to movie rental websites dabbles in negative-option marketing.

Why has this scheme gained in popularity?  Experts suggest that, due to the hectic nature of American life, it works.  Marketers know we’re busy, and that we rarely take the time and effort to review online disclosures.  I’m guilty as charged.  When I signed up for iTunes, I didn’t put on a pot of coffee and read every detail in the user agreement.  I’m not alone.  Who among us has actually read any of these disclosures?  Even if we did, what would we understand? Most are written in pure legalese.

Beyond that, most of the charges go unnoticed for months.  Why?  Again, the breakneck pace of modern life.  We’re busy with work, kids, and trying to find a moment to breathe. Who takes the time to review their credit card statements?  Well, on that note I cannot claim guilt, as I’m all too familiar with the errors that can occur on a credit card statement. Aside from my career as a credit expert, I’m also a recent victim of identity theft.  I would never have detected the seemingly insignificant charges the criminal was making on sites such as Amazon and Audabile.com if I hadn’t taken the time to review my statements each month.  Sure, I know many people who cast aside their statements, even throwing them away without opening them, which, by the way, is an open invitation to dumpster-diving identity thieves.  Be sure to shred any of your statements after you have read them completely.

To protect yourself against unintended charges, there are a few things you can do.  Start by reading every agreement from start to finish.  If you have questions, call the company’s Customer Service Department.  If they can’t provide sufficient answers, move on to another company.  If you choose to opt-in to a service, use a credit card, as they offer more effective protections than your debit card.  Also, if there are any shenanigans, the charges will go against your available credit limit and not your bank account, which could lead to a whole new set of headaches.  And, most important, read all your monthly statements – credit cards, cell phone, cable, you name it. Not only will the review point out any instances of negative-option marketing, but you may come across some fees that simply don’t make sense to you.  If that happens, call to find out why the fees were assessed and see what you can do to have them removed. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

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