How Subscription Services Are Slowly Hurting Your Budget
It’s so easy to sign up — but even easier to forget about that recurring charge on your credit card.
April 22, 2021
We live in an era of convenience. Groceries show up on your doorstep with the click of a button, you never run out of television options and most of our chores are done by machines. One way most of us make our lives even easier and more enjoyable is by subscribing to our favorite services. You can replace a pricey cable package with a Hulu subscription. You can stop running out of necessities like razors by enrolling in Dollar Shave Club. And you can get fun surprises delivered to your door with monthly subscription boxes catering to your interests. We’re living in the era of the subscription model and it comes with a lot of perks.
However, these monthly subscription services have their drawbacks. Once every month, quarter, or year, depending on the subscription, your credit card gets charged and it’s pretty easy to forget about those charges. As fun and helpful as subscription services can be, unnecessary subscriptions may also be hurting your budget.
Where the Problem Starts
One of the main reasons subscription services can be so problematic is because it’s easy to sign up for one of these services and forget about that recurring charge on your credit card. These companies are banking on the fact that you’ll stay enrolled, so they don’t usually like to remind you that you’re about to be charged or ask you if you want to cancel. A 2021 Chase Bank survey found that two-thirds of people have forgotten they have a recurring payment in the past year. That’s a lot of forgotten charges when you consider that the same survey found that 78% of respondents have at least one recurring charge monthly on their credit card and 40% have three to five recurring charges.
Even if you don’t remember you have that recurring charge, it may seem relatively harmless if you budgeted for a recurring monthly, quarterly or annual expense. Unfortunately, a 2019 survey by Slickdeals reported that 37% of people feel that being subscribed to these services actually hurt their budget.
How to Manage Your Subscriptions
In many cases, you may realize you want to cancel unwanted subscriptions, which can be a quick way to lower budget expenses. Figuring out how to cancel unwanted subscriptions can be challenging as these companies tend to want the process to be complicated so you give up or put off cancelling, but it’s worth persevering if you truly no longer want to pay for the service. If you want to stay subscribed to all of your current subscriptions, that’s totally fine, as long as you’re staying on top of them and they're not becoming a financial burden.
One-third of Americans don’t regularly review their subscription services and keep track of how much they’re spending on them according to 2020 research from PurePoint® Financial, In some cases, these consumers may want to cancel, but because they weren’t keeping track of their subscriptions, they’re hurting their budgets as a result. PurePoint Financial also found that one in five consumers went over their monthly budget because they forgot to cancel a subscription, with 10% needing to use their savings to cover the cost of a subscription they forgot to cancel.
To keep track of your subscriptions, here are a few tips you can use to make them easier to manage.
Use the same card. Whenever you subscribe to a subscription service, use the same credit card. That way, all of your subscription charges are all easily visible on one statement. If you have a credit card that you don’t use often but want to keep active, it can be helpful to put subscription services on that card. You’ll keep the card active and if you’re only using it for recurring charges, you can easily review what you’re paying every month for all of these services.
Sync your charges. If possible, it can be helpful to sync your bill dates. If your subscription services of choice let you pick your billing date, adjust your billing dates so they are all billed at the same time (if this is possible for your budget). That way, it’s easy to know what date you need to cancel any unwanted services by and it will be easier to remember when to cancel any free trials that are coming to an end.
Update your calendar. Speaking of free trials, if you ever sign up for one, add a note to your calendar a week or two before the end date to remind yourself in case you want to cancel before they start billing you.
Take note of price increases. Signing up for a subscription service does not lock your price in place. Subscription services do increase their prices from time to time and, while the service provider should email you about these changes (keep an eye out for emails from them), reviewing your monthly credit or debit card statements will ensure you know exactly what you’re currently paying for a service.
Set dates to audit subscriptions. Once a month, quarterly or annually, set a day to review your budget and how subscription services play a role in it. These check-ins are a great time to ask yourself if you really need all of your subscriptions or if you can cancel some of them.
To Subscribe...or Not Subscribe
Think carefully before you sign up for a subscription service and reflect on how it will affect your budget. You might feel like you need to subscribe to every entertainment platform or cool, new innovative service to keep up with your social circles. But only subscribing to the brands that might improve your quality of life or provide a valuable service will make those even more meaningful. PurePoint® Financial discovered that Gen Z and millennial consumers were more likely to feel pressured by subscription services to stay subscribed, which led to 25% going over their monthly budget.
Going into debt just to keep up with the latest and greatest services is not a wise financial decision. Tally's guide to managing credit card debt can be a helpful resource if you find you're paying for too many subscription services.
If subscribing to these services has put a strain on your credit card, Tally can help you consolidate and pay down your debt faster!