Forgetting To Cancel Subscriptions Boosts Businesses' Revenue By 200%, Study Finds (fortune.com) 93
Subscription-based models dominate daily life and businesses profit from forgotten subscription payments. The problem of forgotten subscriptions is so large there's now a robust ecosystem of startups promising to save users money by ferreting out and canceling the subscriptions they forgot about. From a report: Now, researchers have put a number on the high value of customer inertia. Buyers' inattention can boost a business's revenue by as much as 200%, according to a new working paper from researchers at Stanford and Texas A&M submitted to the National Bureau of Economic Research. "I knew that people forgot to cancel," said coauthor Neale Mahoney, an economics professor at Stanford. "The magnitude, the pervasiveness of this issue was surprising."
Mahoney, along with fellow Stanford economics professor Liran Einav and Benjamin Klopack, an assistant professor of economics at Texas A&M, calculated the cost (or -- to companies -- benefit) of inattention by zeroing in on a specific moment in purchasers' lives: replacing a credit card. Using a large dataset from an undisclosed payment system provider, the researchers first identified 10 common subscription services, and then looked at how frequently they were renewed during normal times and when the subscriber replaced a card, forcing them to update their payment information with each service. Renewals sharply dropped off after these card replacements, even as other shopping behavior, such as buying groceries and gas, continued normally, leading them to a conclusion: When people had to actively decide to resubscribe to a service and enter new payment information, many opted out.
Mahoney, along with fellow Stanford economics professor Liran Einav and Benjamin Klopack, an assistant professor of economics at Texas A&M, calculated the cost (or -- to companies -- benefit) of inattention by zeroing in on a specific moment in purchasers' lives: replacing a credit card. Using a large dataset from an undisclosed payment system provider, the researchers first identified 10 common subscription services, and then looked at how frequently they were renewed during normal times and when the subscriber replaced a card, forcing them to update their payment information with each service. Renewals sharply dropped off after these card replacements, even as other shopping behavior, such as buying groceries and gas, continued normally, leading them to a conclusion: When people had to actively decide to resubscribe to a service and enter new payment information, many opted out.
Own nothing (Score:5, Interesting)
And be happy as a perpetual renter, serf!
Re: Own nothing (Score:3)
How anti capitalist of you
Avoid pull-based auto-pay like the plague. (Score:3, Insightful)
Too many relatives and I have been burned by it; either due to forgetfulness, or a corporation making excuses to drag their feet on cancellation or fee reason.
It's the electronic version of a blank check.
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Too many relatives and I have been burned by it; either due to forgetfulness, or a corporation making excuses to drag their feet on cancellation or fee reason. ... It's the electronic version of a blank check.
I'll note that you can revoke authorization and/or put a stop payment on electronic/ACH payments through your bank / credit union. There's ususally a small fee for this, but (I believe) it remains in effect until you revoke it (that's usually n/c). Stop payments on paper checks usually expire after six months, as banks don't usually honor checks older than that, but the stop can be renewed, and you can put a stop payment on unused checks. If you put a stop on a range of checks, there's only the one fee
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I have been as well.
It's why I wonder if companies like Netflix and Disney actually make money by raising rates. Rate increases are usually what reminds me that I still have an active subscription somewhere.
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Most of my recurring payments go through PayPal. I can then easily see all of the payees that I have authorized.
I direct deposit a small amount into the PayPal account every pay period and, if I run out of funds, I have a line of credit with PayPal attached to the account that can be dipped into if needed. The system works pretty well for me as most places take PayPal these days.
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We are talking about the average American here. Half of them can't even manage a surprise $400 expense. Financial responsibility isn't in their lexicon.
It's not just forgetting. (Score:5, Insightful)
Re:It's not just forgetting. (Score:5, Insightful)
To sign up takes one click. Sometimes it didn't even take that, you just don't notice / forgot to uncheck a box.
To cancel takes a call to a premium rate number, during limited office hours naturally, that keeps you on hold for 10 minutes and then you have to fax a copy of some form of identification to another premium rate number. Then do that four times more. Six months later you're still signed up and have to resort to stops on your bank account. Then they threaten you with collection agencies and hammer your credit rating but still won't cancel.
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It's not that hard, most (decent) banks have an app or website, you login, click dispute transaction, explain the situation, they stop and refund the payment.
I've never had an issue and corporations hate that you have that option on any credit card. Off course if you sign up with check or direct bank transfer, that may be more painful but in my experience a message to the credit union's helpdesk and they will resolve it.
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Re: It's not just forgetting. (Score:1)
Send them a Certified Letter canceling your membership
Youâ(TM)re solution is to spend $10 to send a certified letter. It shows you how predatory and scummy the corporations are.
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Even then, though YMMV, often you'll find that companies with service contract
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It's not that hard, most (decent) banks have an app or website, you login, click dispute transaction, explain the situation, they stop and refund the payment.
I've never had an issue and corporations hate that you have that option on any credit card. Off course if you sign up with check or direct bank transfer, that may be more painful but in my experience a message to the credit union's helpdesk and they will resolve it.
I've been around for ~40 years and have *never* had a credit card stolen....until 6 months ago. It took the bank 2 weeks to replace it, and I was late on a lot of bills.
Fortunately I discovered privacy.com. I linked it to my bank account, and it lets me issue virtual credit card numbers that are locked with an amount and a time period (i.e. one-time charge, daily, monthly, yearly, etc...)
No one gets access to my bank accounts now. Every single service has a set amount they can charge, and privacy.com
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Not a single streaming service requires you call anyone. What else do you have that's re-occuring that you wouldn't want to talk to someone anyway? I kind of don't want my utilities, insurance or phone to not renew.
I did look into replacing my insurance company recently but found out they were some how still the best deal in town and that was AFTER they raised my rates. Wasn't happy about it, but you need car insurance. Actually, I was pissed since I haven't had any tickets or claims in over 3 years, so why
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California -- claims payouts have gone up something like 40%, and the aggregate customer pays for that. Dunno about costs elsewhere (likely does not help that a fender bender was a minor repair on old cars, but on new ones can mean it's totaled). Here the problem is a billion in damage from a major hailstorm, and we all pay into the aggregate. But yeah, I know the feeling... 50 years accident-free with the same company, and the rate just keeps going up, even so it is still the least awful of the lot.
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You missed a step. While you're trying to cancel, they doubled the price and failed to notify you or ask for verification.
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This side of the pond has a tendency to use those kinds of NGN. Setting up a freephone number costs a lot more than a premium one. I have a premium number myself (cost me £5 to set up) and that is the number I supply to any business that demands a landline number in order to proceed with an online service. The yearly fees (again, about £5) are paid off in short order, as they decide they can make up-selling calls. So I keep them on the line instead of immediately refusing / hanging up.
Also comes
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To sign up takes one click. Sometimes it didn't even take that, you just don't notice / forgot to uncheck a box.
To cancel takes a call to a premium rate number, during limited office hours naturally, that keeps you on hold for 10 minutes and then you have to fax a copy of some form of identification to another premium rate number. Then do that four times more. Six months later you're still signed up and have to resort to stops on your bank account. Then they threaten you with collection agencies and hammer your credit rating but still won't cancel.
Which is why this kind of shit is illegal in most civilised countries.
A subscription must be easy and zero cost to terminate. You cant make people call you in order to terminate a subscription (although some people try and then get smacked down for it). If they don't cancel, you can then complain to a regulatory authority and inform your bank that these charges were taken without your authorisation. who will then charge the company back (incl. a chargeback fee for the offending company). Usually the thre
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With the exception of SiriusXM, none of the services I've used and dropped have had that much of a barrier. I'm having a hard time thinking of one I didn't simply cancel unaided through the web site.
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You've obviously never used Bellsouth.
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I'm still signed up with a VoIP company that claims it won't consider my subscription canceled until I either box up and ship my VoIP adapter back to them on my own dime, or else pay something like $50-100 to keep it (even though it's effectively e-waste). In other words, I literally need to pay them to quit.
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Funny how signing up is always easy
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Sometimes they make subscriptions damn near impossible to cancel, due to inability to talk to a human being and a lack of one-click cancel option from a website.
Agreed. Amusing anecdote follows...
I have a customer who had some services hosted at Rackspace. This year they spun up new stuff in Azure. Once it was tested and in production, I went to shut down and discontinue the Rackspace services. Turns out you can't. You have to form a support ticket requesting account closure. Then you get told there's a 90-day notice period. The customer is stuck paying for a quarter of a year for VMs I shut off.
But wait... there's more. We just got an automated notice
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I have profited from this with Amazon. They keep offering me free trials of Prime, and I keep putting a note in my calendar to cancel them when the free trial is almost over. Now that I've found how to cancel on their website, it's not actually that difficult. I mean it is to figure out in the first place, but once you know you can get free Prime for about 1/3rd of the year. I usually save the free trials up until I'm going to buy a few things, or need something next day.
Everything old is new again (Score:5, Insightful)
All those old music and book clubs worked like this. You had to actively decline your subscription or get billed. At least they actually sent something.
All the food and mystery box subscription services now work this way - you have to opt out, but at least you get something.
Streaming services are more like gym memberships. You get billed even if you don't use the service. Pure profit. And just like gym memberships, you can bet they've heavily oversubscribed the service - this is why they deliberately degraded service during covid when everybody stayed home and binge watched TV.
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All those old music and book clubs worked like this.
Except that's not what this is.
"there's now a robust ecosystem of startups promising to save users money by ferreting out and canceling the subscriptions they forgot about"
THIS describes the ironic level of effort and ignorance it takes to actively hire a service to go look for the bills you're too lazy to go look for yourself and forgot to cancel.
That's a whole new level of pissing money away, and hardly compares to the "simple" scams of yesteryear.
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Don't tell me... the punchline is that the startups that go after subscriptions you forgot... are themselves subscriptions.
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That's actually pretty awesome!
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And the most obvious one from the prespective of online life would be AOL from about 1998 on-ward..
As you say though this the same model that is been used by gyms and the likes of Columbia House for ages. Its neat the academics put a figure on it, but anyone in these industries probably could have told you and anyone paying any attention to their own behavior or that of friends and relatives knew as well.
The amazing part is the typical consumer never seems to learn...
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In the UK they do it with car insurance too. Unless you opt out they "helpfully" keep your card on file and bill you for whatever joke of a quote they come up with next year.
Gym membership (Score:4, Interesting)
A friend has been a "member" of her local gym for the last 5 years but hasn't gone there in the last 4.
I asked her why she didn't just cancel and stop paying them all that money. *crickets*
Because if she canceled then she'd feel like she failed but as long as she's paying she can tell herself she'll eventually go back.
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Because if she canceled then she'd feel like she failed but as long as she's paying she can tell herself she'll eventually go back.
I'd chalk this up to a side effect of mass narcissism. If you're paying for the same membership, then you're just as good as anyone actually using it.
And we wonder why people are downright delusional about fitness.
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Gyms are a pain to cancel. There is a very brief window from when you can cancel to when you get the autorenal fee that usually costs more than the monthly membership.
In reality, you should just see that as a sunk cost but it's hard to emotionally accept that versus thinking you may as well continue your membership and try to use the gym since the most expensive fee has already been charged.
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I work out at home so I don't know gym details but how can it be cheaper to pay the monthly forever than just cancel and eat whatever the cancel fee or whatever is?
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It wouldn't be cheaper - that is where the sunk cost comes in.
+200 renewal membership fee
+5 a month afterwards for monthly fees
Once you have already been billed the $200, it feels dumb to cancel to get out of the $5. But it's not dumb; not canceling keeps you trapped in the cycle.
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Oh, I see. You're talking about the psychology of it not the true calculated real world wallet cost, thanks.
IIRC she's paying something crazy like $80/month, too. I said my piece, she won't cancel it. Makes me feel queasy to think about the waste.
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A friend has been a "member" of her local gym for the last 5 years but hasn't gone there in the last 4.
I asked her why she didn't just cancel and stop paying them all that money. *crickets*
Because if she canceled then she'd feel like she failed but as long as she's paying she can tell herself she'll eventually go back.
Is that really the gyms fault though?
She hasn't "forgotten" to cancel, she's just being lazy about going.
This discussion is more about the dodgy tactics companies used to sign you up for things (I.E. uncheck this impossibly small and difficult to notice box to not join a subscriptions) and make it difficult to leave (I.E. ring this premium line when you'll be on hold for half an hour and then spend another half an hour arguing with our "customer retention specialist" who spends their entire time tryin
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Because leaving a gym is a hassle, too.
Few gyms will let you just say, "hey I'm done, here's my ID, cancel my membership" and just do it.
Interesting anecdote (Score:4, Insightful)
I subscribe (for free) to a magazine circulated by a large corporation. Once a year they e-mail me to remind me to renew. Or they will suspend my subscription. Evidently, it's some sort of requirement. Even though they give this away for free.
Why not extend that law/regulation to _all_ subscriptions?
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Why not extend that law/regulation to _all_ subscriptions?
"Boosts Businesses' Revenue By 200%"
And look to destroy the entire corrupt market that exists on top of the regular market?
There's a reason stupid isn't illegal. It's far too profitable.
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There could be other reasons besides wanting to sell advertising. There are lots of reasons to maintain accurate circulation figures for a print magazine. One might be just so they know how many to print (and what those costs will be). Another would be that they need to provide up-to-date circ figures to the postal service so they can qualify for discounted postage rates. (Does it say "second class" on the mailer somewhere?)
Full disclosure: I used to work for a couple of those print magazines where you coul
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To be honest, those giving away "free" circulations know that someone is ultimately paying for them.
And likely via tax-sheltered donations that have to be validated by gathering statistics instead of funds.
Re: Interesting anecdote (Score:5, Interesting)
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If that magazine sells advertising
Nope. Aramco World magazine.
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I can see having to track legitimate circulation if you are selling ad space to someone else. But not if you are circulating your own ads. I wish all the mailbox stuffers would be required to receive permission before sending me junk mail.
Re: Interesting anecdote (Score:2)
Paypal (Score:4, Informative)
Either pay with Paypal only and use it to manage recurring payments, or cancel the card.
Re:Paypal (Score:4, Informative)
Or use Privacy.com to generate CC #s that link to your real card or bank account. Then you can cancel those with ease.
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I've used that company for years with no issue.
And what's wrong with Iceland?
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Yep, totally this!
It's what I do. I like that I can see all my authorized recurring payments and revoke any as needed.
There aren't that many online places that don't take PayPal (Amazon is one of them, which is why I don't shop there much anymore).
Hell, even my cell phone plan takes PayPal.
Re: Paypal (Score:2)
Re: Paypal (Score:1)
Great News! (Score:2)
Who doesn't keep track of their money? (Score:2)
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I avoid automated payments like the plague because I want to be in control of my own finances, but these automated systems actively work to make people less aware of their situation.
For instance my phone bill offers a $10 per month discount with automated bill pay. But that is so that customers don't see the constant fee increases. There is also the option to pay online instead of mailing a check - well the 'paym
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You are not wrong about your carriers reasons for the behavior at all.
You're solution though could use a little adjustment for two reasons. Automatic payment means you never accidentally miss payment and get slapped with late fees or take hits to your credit score because - the post office failed to deliver that piece of mail for example.
What you should do is play their game - embrace the auto payments, take their $10 discount. But have a single credit card you use for all your automatic renewal subscripts
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For instance my phone bill offers a $10 per month discount with automated bill pay. But that is so that customers don't see the constant fee increases.
Hate to say it, but your phone company sucks. T-Mobile sends me a notification every month that says how much they're going to charge my credit card. If the fees ever increase, I see it immediately.
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Of course this is all on purpose because the companies spend a lot on studying how to make the customer a push over, but you call it marketing.
Ars (Score:2)
I told Ars Technica a few years ago that the way they bill subscribers in perpetuity is wrong and anti-customer, and that it only benefits Ars. Ars told me that I was wrong, I'll take this article as vindication.
If you do good work I will subscribe. But you need to keep doing good work year after year if you want me to continue to support you. You do not get the benefit of just billing me forever because I liked you once. The onus is on the people selling stuff to keep providing things I like, the onus is
feels like this is a non partisan issue (Score:2)
Maybe Dems and Repubs could all just agree that we pass a simple, narrowly defined law - no additional shit added to it in committee - that says "for any subscription service, the customer must ACTIVELY AFFIRM the duration of their subscription; if a free sub is being offered, the payment may not begin without an affirmation specifically from the user or it defaults to 'cancel' without such affirmation"
Can we just agree on this one?
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There will be 15 ryders added to that bill ranging from increases in defense spending, food stamps, unemployment benefits, etc.
And then people will be screaming about why their subscriptions were canceled.
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I'd be one of the screaming ones. I'm an adult. I can manage my own finances just fine. I don't need the government demanding every company to get my permission to continue providing me a service "I" signed up for. If I didn't want that service, I would cancel. I checked the renew box for a damn good reason, after all.
Autorenew should be an affirmative choice (Score:2)
Subscription services should have to affirmatively ask without penalty, if a user wants to autorenew and abide by that choice. That is regardless of it being a free trial or someone paying for a period of time. And the service should be required to give notice in advance of renewal with a link to manage settings. On top of that, changing the setting should be a single affirmative action - not bullshit darkpatterns to confuse people into thinking they've changed the setting when they haven't.
Basically just s
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Yup. Guarantee they'd do it via an email packed with ads and marketing crap that will go into your spam folder with a tiny link 5 pages down to cancel.
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Legislation has to anticipate how companies might be dicks about it and head them off at the pass.
Unholy relationships - GMC/Onstar and Mastercard (Score:5, Interesting)
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I'm pretty sure Hulu has the same agreement.
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a lot of places do that now.
I would say it is incredibly unprofessional to just ghost/cancel via nonpayment - on a service provider as well.
The real problems is its bad business all around. Consumers like you feel its okay to treat providers like crap. Providers feel its okay to treat consumers like crap.
I'll say this, if you can't manage your personal finances (or pay someone to do it for you) at least to the point you are not paying invoices for things you can't identify or havent used in years - is well
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Wow, that is REALLY sketchy
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I've long suspected something similar. I find that some companies seem to be able to bill my card even when it's way past the expiration data I gave them. Unless I explicitly cancel the card (which I don't wish to do), they seem to be able to charge me indefinitely.
The ownership class (Score:2)
The ownership class gets smaller, and smaller...
I avoid as many subscriptions as possible.
Easier to cancel... (Score:2)
It's simple (Score:2)
Some of them renew you despite getting a new card! (Score:5, Interesting)
I had an "interesting" situation with SiriusXM satellite radio, some years back. I purchased a discounted 1 year subscription to the service. But I did so knowing the credit card I charged it on was going to expire before the renewal period, so I wasn't real concerned about them keeping that card on file.
Turns out? They managed to charge a renewal (at the regular price) to the new, replacement card I'd gotten in the mail. Doesn't seem like that should have been possible since if nothing else, they had no way to know for sure what the new card's expiration date was. But they got around that anyway.
More recently? My mom started battling a problem with someone fraudulently placing charges on her BoA VISA card. In her situation, Bank of America would catch the attempt to fraudulently charge it, so they'd shut her card off. When she'd call in and verify her identity, they'd explain what happened and mail her out a replacement card with a new number. But within 1-2 weeks, the same thing would happen with the new card. Rinse and repeat! After 4 or 5 times of this nonsense, she demanded an explanation. BoA's fraud dept. claimed "there are services out there now that people can pay to provide them with your replacement card info, as long as you're able to give them your previous card info that used to be valid". (Stupidly, BoA still had no solution for my mom's issue other than mailing her yet another new card, because "that's the policy".)
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I suspect that when a new card is issued, the old number stays valid for a while
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It's not Forgetfulness (Score:2)
The paper is talking about cancellations, not subscriptions lapsed due to the card expiring.
They talk about "inattention" but that's not the same as forgetting. If the consumer forgot there's no real reason to think they'd remember when the new card showed up.
This has more to do with attention, they know they have the subscription but aren't actively doing anything about it. The consumer doesn't have some alert that pops up and tells them when the subscription has negative value, if anything, the less they
How lazy do you have to be (Score:2)
...to not check your financial statements?
I check my bank and credit cards daily, so does my wife
ANY unwanted charges are immediately dealt with
This research will be abused (Score:2)
Great! They found another way of exploiting us. This'll probably mean we receive no more mailings from the paid services we forgot to cancel after say six months, so we'll just be paying forever, until we notice them.
Well... (Score:2)
People are stupid and forgetful. I know it would be MORE annoying if I had to actively resub every month to my services. That would drive me bonkers.
What I like to do is subscribe to something and then cancel almost immediately. I get the month I paid for and then if I don't resub after that, I clearly won't be missing it anyway. What's so hard about that?
this is why i eschew subscriptions as a policy (Score:2)
anything that needs a subscription, paid or not, especially if they say it's free but they still need a credit card for identity proof gets a pass from me. don't need that many passwords floating around and companies tracking me.