Free trials are a massive rip-off
Can you believe we waste £250 million a year on supposedly 'free' tryouts? Oops.
How many times have you decided against signing up to a free trial because you're worried about hidden charges buried deep in the small print?
You're right to be wary, as new research reveals that we Brits waste more than a quarter of a billion pounds a year on allegedly 'free' trials.
The £250m rip-off
According to new research by credit card company Capital One, UK residents waste a shocking £251 million a year by signing up to so-called free trials. These unwanted charges are caused by consumers signing up for paid-for services by mistake, or by forgetting to cancel free trials before no-fee periods end.
Capital One found that, over the past 12 months, over 18½ million people (37% of adults) people have signed up for free trials. Of these, more a third were then clobbered by unwanted charges.
Almost a quarter (23%) of subscribers to free trials paid an average of £42.50 each to merchants, simply because they forgot to cancel their trials. A further 11% were charged an average of £35.20 each because they unwittingly signed up to paid-for services.
Almost one in 10 free-trial subscribers didn't get any access to the promised product or service. Also, more than a quarter (26%) got bombarded with unwanted emails, text messages, calls and correspondence afterwards.
Overall, Capital One estimates that, every year, six million Britons pay the price for 'free' trials!
One recurring problem
What's more, Capital One found that five in six consumers (84%) didn’t fully understand merchants’ terms and conditions when signing up for free trials. As a result, under half of triallists (44%) said they were happy with the free trial they had signed up to.
As a result of its research, Capital One has pointed the finger at one key cause: the difficulties associated with cancelling regular and recurring payments.
With recurring payments, cardholders authorise merchants to take regular payments from their credit cards (in a similar way to direct debits being taken from current accounts). When consumers unknowingly commit to these payments, they can find them hard to cancel without help and support from card issuers or banks.
Capital One identified the biggest culprits in this category as online DVD rentals, free anti-virus software, and dating websites. Of 26 firms in these categories, 14 use recurring payments as their default option. A further nine provided an option to pay using recurring payments or direct debit, with only three sites not offering recurring payment options.
Eight million mysteries
Of those who had intentionally signed up for a paid-for service, more than four million people (9%) said they had issues with the recurring payment it demanded. Even more worrying, Capital One estimates that eight million of us may have recurring payments set up that we are unaware of!
In this new age of austerity, genuine free trials are a great way to 'try before you buy'. Furthermore, when applied in a fair and transparent way, recurring payments can be a convenient way to pay for ongoing services, or spread the cost of goods.
However, what can you do to protect yourself against failing foul of sneaky marketing tactics?
Six steps to safer tests
- When signing up to any free trial, read the small print. For any contract to be valid, all fees and charges should be clearly set out in the terms and conditions. Quite simply, if they're not there, then they're not enforceable.
- Put a date in your diary. On the same day you sign up to a free trial, put a reminder in your diary or calendar to give you plenty of time to cancel before the free trial ends and payments begin.
- Complain to the merchant taking unwanted payments. If it is a legitimate business (and a few heavy Google advertisers aren't!), then it should allow you to cancel by telephone, email or letter.
- If you're having problems with recurring payments being collected by credit card, the first step is to complain to your card issuer. For direct debits, contact your bank. Ask for a copy of its complaints procedure, as well as a written explanation of how it deals with disputed payments.
- If your card issuer won't listen to your grievance, then ask for a 'deadlock' letter to enable you to make a formal complaint to the Financial Ombudsman Service (FOS). As FOS fees run into hundreds of pounds, this should spark a more sympathetic response.
- Only when you've exhausted all other options should you approach the FOS. The service is struggling under a huge backlog, so don't expect a reply for at least eight weeks.
Finally, it's worth pointing out that not all free trials should be tarred with the same brush.
Recently, I signed up to a one-month free trial to LOVEFiLM, the leading DVD rental firm owned by Amazon. As well as this tryout, I got a free £20 Amazon voucher, too. I'm so pleased with this service that I'm happy to continue paying a tenner a month for it.
In summary, some free trials are better than others, so tread carefully and stick with trusted brands!
Please note there is no connection between LOVEFiLM and lovemoney.com/lovefood.com.
More: Find perfect credit cards for Christmas | Earn four times the interest on your savings | Save a fortune on broadband, phone and TV
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As a matter of interest,if you have online banking, you can cancel direct debits, standing orders and so on ..usualy with a simple click of the button!!
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Never, ever, set up a recurring debit. If you aren't offered the facility to make a one off payment, then consider alternative suppliers. Recurring payments can be very hard to cancel, and changing/cancelling your card is no guarantee, as they can still charge to the old card, and the bank will just transfer the debt to your new account. On the flip side, if you set up a recurring debit on a card that will expire soon, they cannot collect a recurring debit on an expired card. This is how I managed to claw myself out of the clutches of Credit Expert (Experian). Repeatedly asking them to cancel just resulted in another monthly payment being collected, but when the card expired, they started begging me to supply my new card details. They even threatened me if I didn't submit the new details... ...'If you fail to set up your new details, you could find yourself a victim of identity theft without even knowing about it. Send us bucket loads of money now, and protect yourself from becoming a victim'... (Or words to that effect) Actually, what is worse? Having your identity stolen, or being fleeced by companies who use such threats to extort money from you? After all, the data Experian hold is yours anyway, so why pay for something which is your property? (Or more to the point, why is it SO expensive to have access to YOUR data. Surely a one off fee should cover you for unlimited access for a set period of time. Why do they need to charge monthly for data that MAY not change for many months, or even years?) If you do need to set up a recurring debit, it is better to use one of the payment gateway providers, such as SagePay, rather than do it with the vendor direct, as providers are independent of the vendor and have working mechanisms for cancelling such payments (such as logging in to your account and clicking the delete button).
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From personal experience, NEVER EVER EVER sign a direct debit from a credit card. You can't stop the payment without the goodwill and competence of the merchant. In one case, membership of an Irish organisation which required payment in another currency, we had closed the account, changed to a new credit card and informed the treasurer of the organisation, but our old credit card was still charged. The bank simply set up a new credit card account and charged us. Even direct debits from a bank account are not completely foolproof. When we switched bank accounts, the merchants were supposed to be informed automatically. 80% of direct debits transferred successfully and the old debits were cancelled automatically. However, for several. the merchant simply resubmitted the original direct debit instruction to our old bank, which despite the fact the debit had been cancelled, without questioning set up a new direct debit. They said this was their normal practice.
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28 November 2011