It’s becoming increasingly popular for businesses to adopt a subscription model, offering customers access to convenient services — like TV streaming — for a small recurring fee.
And most Canadians are buying. According to Payments Canada, roughly 90 per cent of Canadians used electronic fund transfers (EFT) to pay for at least one routine expense per month in 2017.
Such transactions are mostly “electronic remittances to pay billers,” but consumers are also using EFT to pay for recurring bills, and these automated charges can quickly add up.
A single-digit charge at the beginning of each month may not seem like a big deal. In fact, it may even go unnoticed. But by the end of the year, you could have wasted hundreds of dollars on relatively unused services — a phenomenon known as “subscription creep.”
“You should always do a regular checkup on your finances… That means going through your credit card statements and seeing, line by line, where your money’s going,” said personal finance expert Barry Choi.
“Quite often, people just pay off the bill and they don’t go through, line by line, to see what their expenses are,” he told Global News.
Signing up for free trial periods can also result in unwanted charges.
“That’s obviously a great marketing tactic from all these businesses. That’s how you get their emails and that’s how they convince you to buy something you may not have normally bought,” said Jessica Moorhouse, a financial counsellor and host of the Mo’ Money podcast.
“Sadly, what most people do is they sign up for it, they completely forget that they do it and they don’t use it. They get charged for a month and they may even forget for several months.”
Here is some expert advice on how to curb “subscription creep.”
Take a hard look at your spending over the past few months
“It sounds really annoying and boring… but look in the past to see where your money has gone,” said Moorhouse.
The best way to see all of your monthly charges is to sit down with your credit card statement.
If you have online banking, download the Excel spreadsheet version of your statements. This will allow you to comb through even the smallest expenditures, line by line.
It’s not enough to audit only your charges from last month because some subscriptions may not renew on a monthly basis.
Moorhouse recommends that you do this with spending statements from the past three to six months.
“ be looking at month three and… they’ll say, ‘Oh, I don’t even know what this charge is,'” she notes. “Then they realize it’s a subscription that they forgot about… Had they not looked at every line item in their spending, they could have been spending maybe $30 every couple of months and not even notice.”
As Moorhouse puts it, that $30 could be put towards a nice meal, an emergency fund or paying off debt.
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However, Moorhouse recognizes that reflecting on what you’ve spent can be very stressful.
“Taking a good look at your spending… is very easy to say, harder to do because most people don’t really want to confront what’s going on with their money,” said Moorhouse.
“It’s very psychologically difficult to actually do.”
That’s why it can be helpful to do it with a financial advisor, who can guide you through the process in a helpful, non-judgmental way.
Be honest with yourself about the value of your subscriptions
Do you really need subscriptions to Netflix, Amazon Prime and Crave TV?
The answer will vary from person to person, experts say.
For Choi, subscriptions are fine as long as you’re getting value for what you pay.
“If you’re watching all the time and that’s your primary channel of entertainment… that’s perfectly fine,” he told Global News.
“But if you’re only watching Amazon Prime once a month or for one show, start to question if it’s worth paying the .”
It’s about assessing if having the service is worth it to you despite the charges.
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“There was a point where my husband and I were subscribed to Amazon Prime, Crave and Netflix,” said Moorhouse of her subscription habits.
“When you add up all those things together, it’s still cheaper than a traditional cable package. But do we actually use them?”
That’s the question you have to ask yourself when deciding if you should unsubscribe from a service, according to Moorhouse. You shouldn’t keep paying the fees just because the service is cheap.
“I think still have Amazon but it’s not so much for TV. We actually use the shipping,” she said. “We’re not just doing it for the TV shows and movies it provides… We’re getting value from this service because we also use the shipping quite a bit, and we save money .”
Moorhouse assessed what she and her partner get out of that subscription, and she asked herself if the fee was reasonable for the benefit it provided. Ultimately, it was.
Free trials are great, but take note of when they will expire
Whenever Choi signs up for a free trial, he sets a reminder in his phone one week prior to when it’s supposed to expire.
“You need to give yourself a one week grace period,” said Choi. This will help ensure you won’t have any unnecessary charges that month.
“It’s just easier to do it in advance… because, once that date passes, you’re automatically charged. Then you need to go through the hoops of trying to get that money back, and there’s no guarantee that you will.”
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Moorhouse has had to jump through those hoops many times.
“I’m sure everyone has a story like this. I signed up for something for free, forgot about it and got charged,” Moorhouse said. “It really ticks me off.”
In this situation, Moorhouse often contacts the company directly and asks for a refund.
“What I do now is… I look clearly at the trial period. Then, in my digital calendar, I an alert,” said Moorhouse.
She also sets her cancellation reminder for a few days before the trial expires to make doubly sure she won’t be charged.
According to Moorhouse, if you’re trying to save money, the first thing you should cut is your subscriptions because they’re usually not a necessity.
“It’s really on you to identify what the most important things are. What brings the most value to you?” Moorhouse said. “And remember, if you unsubscribe from something, it doesn’t mean in the future you can’t resubscribe… It’s not a done deal forever.”
© 2019 Global News, a division of Corus Entertainment Inc.