How to cancel that subscription: Why more Americans are dumping monthly payments
As cost-conscious Americans tighten their belts in an uncertain economy, they are starting to notice how quickly monthly subscription charges add up.
Feeling oversubscribed? You are not alone.
Most things these days – food delivery, ride sharing, TV and music streaming, fitness classes, digital storage apps – seem to come with a monthly payment.
Few people have a system to manage the steady stream of autopilot charges on their credit cards or to track price hikes. What’s more, they underestimate how much they spend each month on subscriptions.
But as cost-conscious Americans tighten their belts in an uncertain economy, they are noticing how quickly these monthly charges can add up. Some 6 in 10 U.S. adults are considering breaking up with some of their paid subscriptions, according to a recent CNET survey.
“When people’s budgets are tighter, they start asking themselves: Do I need to be paying over time for this?” asked Marco Bertini, a marketing professor at Esade, a university in Barcelona, who was not affiliated with the CNET survey. “It just feels like a heavier burden.”
What is the average amount of money spent on subscriptions?
Cassandra Navarro of Scottsdale, Arizona, canceled her Hulu, Amazon and DoorDash subscriptions earlier this year.
Streaming services have been too quick to drop titles and raise rates, she said, and she’d rather shop in person at Walmart or pick up a takeout order directly than deal with the extra costs associated with delivering goods directly to her doorstep.
Navarro and her husband aim to cut out more music and movie streaming services after they move into their new home and have more space to collect CDs and DVDs.
“It just all adds up so much,” Navarro, 30, told Paste BN. “We don’t mind having one or two subscriptions, but when you have so many subscriptions at once, you start to feel like you don’t have control of your life anymore. … You can’t keep track of your own finances.”
The average American spends over $1,000 a year on subscriptions – $200 of it on unnecessary or unused subscriptions, according to the CNET survey.
Why do I need a subscription for everything?
Nearly 75% of companies that sell directly to customers offer some sort of subscription, according to an industry and background note coauthored by Harvard Business School marketing professor Elie Ofek.
The model makes sense in certain industries and can help consumers access big-ticket items, according to Bertini. But companies “cannot and should not fit subscriptions to everything.”
"There are some places where it makes sense, and some places where it doesn’t," Bertini said, adding some bank on consumers simply forgetting the recurring charge.
Those companies risk losing customers, especially as Americans tighten their purse strings. Retail sales were down 0.9% from the previous month in May, following a 0.1% dip in April, according to the Commerce Department.
"Disposable income, during tough times, is a little more uncertain. It may be higher one month, lower another, then maybe I’m unemployed. Do I want to have a recurring expense when my disposable income is a bit fluctuating?” Bertini asked.
University of Maryland marketing professor Daniel McCarthy said the biggest risk to subscription companies is a lack of new subscribers, rather than a drop in the current subscription base. And that drop off will hit certain industries harder than others.
"If you’re a utility like a telecom provider, (the risk is) probably pretty low," he said. "If you start moving toward streaming services, I think the risk goes up. When you move toward a box subscription, the risk becomes pretty high.”
Is the 'click to cancel' rule in effect?
While subscription companies aren't immune to the effects of increasingly cost-conscious consumers, McCarthy says subscription-based companies are expected to weather economic turmoil better than purely transactional businesses.
“It takes effort to cancel, where it takes no effort to not purchase,” he said, adding that subscription companies fared well during the Great Recession. Netflix, for instance, closed the fourth quarter of 2008 with a 26% year-over-year leap in subscribers, and another 31% increase in the fourth quarter of 2009. Software company Salesforce also saw a jump in revenue and its customer base between 2008 and 2009.
But a new rule from the Federal Trade Commission could make it much easier for consumers to click "unsubscribe."
The agency's "click to cancel" rule, adopted last year under former Democratic Chair Lina Khan, requires businesses to make it as easy to cancel a service as it was to sign up. In other words, if a company allows you to sign up in two clicks, canceling should take no more than two clicks.
Originally set to go into effect in May, the rule has faced legal and political challenges. Business associations have sued to block it, arguing it places too many burdens on businesses. Andrew Ferguson, the current Republican FTC chair, said he voted against “click to cancel” because it came during the lame-duck period.
The FTC has delayed enforcing the rule until July to give companies more time to comply.
"I really hope that sticks because this is hurting people," Khan said during an appearance on the “Pablo Torre Finds Out” podcast in June. "Nobody should be stuck paying for a subscription that they either never signed up for or want to cancel."
How to cancel an unwanted subscription
Looking to trim monthly expenses? Here’s how to break up with paid subscriptions.
◾Use a budgeting or subscription management app. Apps like Rocket Money can identify and cancel unwanted subscriptions. (Yes, you have to pay for these by the month).
◾Or conduct a subscription audit. Check bank statements and credit card bills to make a list of all paid subscriptions. Assess each one in terms of value for the money and cancel any that you do not regularly use.
◾Keep an eye out for renewal notices and notices about price increases in your inbox. Set up calendar alerts to stop automatic renewals.
◾Can you replace a subscription for a paid app with a free or cheaper version? Rotate your TV streaming services and subscribe to only one or two at a time, or get a free subscription through your mobile carrier or another membership service such as Walmart Plus. Keep an eye out for sales and promotions. Check out books, music and movies from your local library.
(This story has been updated with new headlines and to correct a typo.)