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Two-thirds of consumers have forgotten about at least one recurring payment within the past year, according to a recent survey conducted by Chase and SWNS OnePoll. Among them, 71 percent estimate this cost them more than $50 a month. That’s real money—at least $600 annually and possibly a lot more.
Chase has unveiled a new tool to help their credit card holders determine where their card info is saved. I have the Chase Freedom Flex℠ card, so I tested this “saved account manager” feature out for myself. I was surprised to learn that seven different retailers have my Freedom Flex number on file. That’s more than I expected since I’m not usually a big fan of saving my credit card info. Two of these are recurring monthly payments. The others are retailers that saved my card number to facilitate easier purchases in the future. I didn’t always realize they were doing this.
The downside of convenience
Unwanted charges are a big risk, especially recurring subscriptions you’ve forgotten about and free trials that turn into paid subscriptions. Impulse purchases and identity theft are other possible pitfalls.
Chase’s primary motivation in calling attention to this issue seems to be as a customer service benefit. I applaud them for that—you don’t always see card issuers encouraging customers to limit how much they spend. Card networks have gotten more active on this front, too.
In 2019, Mastercard mandated that merchants offering free trials get explicit permission from the customer before initiating a paid subscription. Merchants are also required to send reminders every month thereafter with clear instructions for how to cancel if desired. The catch? It’s only for physical goods, not services (such as streaming plans). Soon thereafter, Visa and American Express enacted similar policies that cover both goods and services.
The sentiment is admirable. But it’s not just out of the kindness of their hearts; there are business benefits for these companies, too. Credit and debit card payment disputes—often referred to as chargebacks—cost financial institutions time and money.
Chargebacks911 is a company that advocates on behalf of merchants. Its chief operating officer, Monica Eaton-Cardone, told me that chargebacks rose about 25 percent over the past year. Early in the COVID-19 pandemic, most disputes pertained to travel cancellations, but that has shifted to e-commerce transactions, she explained. E-commerce spending surged 32 percent in 2020, according to the Census Bureau, as the pandemic forced people to stay at home.
What to do if you have a problem
Disputes are more likely in a card-not-present transaction. Many customers have had legitimate gripes—for example, recurring billings gone wrong or merchandise that never arrived or was damaged. But a chargeback shouldn’t be your first step. Always try to work it out with the merchant first.
Eaton-Cardone estimates that about 80 percent of digital entertainment chargebacks and at least 60 percent of membership-related chargebacks were legitimate transactions (“friendly fraud,” in other words). This has become a huge problem for merchants, and by extension the financial institutions that are involved in the transactions.
It’s often not an intentional effort to deceive. Some customers see a chargeback as the path of least resistance, or they make the incorrect assumption that a chargeback is the best way to request a refund for a shirt that didn’t fit or an impulse buy that they later regretted. If you have a customer service issue, attempt to resolve it with the merchant first, then pull in your card issuer if needed.
Also, consider unlinking your cards from retailers’ websites. This can ward off unwanted charges and limit your potential exposure if the retailer is hacked (note that saving debit card info is particularly dangerous since this represents direct access to your checking account). And saving your card info makes you more likely to buy stuff you don’t need since that one-click access is so easy. That’s what retailers want. It’s too easy sometimes.
The bottom line
Take special note of recurring billings and free trials. Set calendar reminders so you don’t forget. The Mastercard, Visa and American Express guidelines are helpful, but sometimes things slip through the cracks. A merchant might not follow the rules or you might miss the notification. And ask yourself if you really value that recurring purchase. Spending $10 here and $20 there doesn’t feel like a lot, but it can be a trap. Consider that a monthly expense you trim from your budget each year has 12 times the impact of cutting the same thing just once.
Have a question about credit cards? E-mail me at firstname.lastname@example.org and I’d be happy to help.