I think most of us have been there: you sign up for a free trial of a product or service, just to see if you like it. Next thing you know, your credit card has been charged a subscription fee, even though you might not have intended to continue with the company after your trial ended.
These often-sneaky transactions, called “grey charges,” are offered by companies of all types. They are becoming increasingly common, too, costing consumers hundreds of dollars a year on average… and now, MasterCard wants to crack down on them.
According to a recent press release from the credit card giant, merchants will soon be required to follow a new set of rules when it comes to free trials and the automatic subscriptions that follow. The guidelines, set to go into effect on April 12, 2019, will ensure that customers have ample notice before being charged for services and products that they may want to cancel, and that they are kept in the loop every time their cards are charged.
Once in effect, these new rules will help prevent free trials from becoming costly monthly charges for unwitting customers.
Free trials have long been a marketing strategy for merchants. They allow people to try a product or service before committing, which is desirable for the customer and can be a great deal. However, consumers often forget to cancel their free trials before being charged for a recurring subscription, even if they didn’t intend to continue buying from the company.
Some companies will refund these grey charges if a customer calls right away after being charged, but this is not always the case. For many consumers, they are stuck paying for at least one subscription period of a product or service they didn’t want. For many other consumers, who don’t notice the recurring charges on their card statements, this can go on for months or years, and cost them thousands of dollars.
To prevent costly and unintended subscriptions, merchants will now be required to get consumers’ consent following the end of a free trial, before they ever charge the credit card on file for a subscription. Merchants will also be required to send cardholders a receipt each and every time their card is charged. This text or email receipt will need to show the transaction amount, date, and the merchant name, along with explicit instructions for how to cancel the subscription, if desired.
“We have noticed an increase in the number of merchants offering these ‘free’ trials for physical products, as well as seen a rise in consumer complaints in this specific space,” says MasterCard’s vice president of communications, Chaiti Sen. “It is our goal to ensure that we can provide a safe and secure ecosystem.”
The new guidelines will, for now, only impact merchants who accept MasterCard payments for physical goods. They won’t apply to companies who provide digital services, such as web hosting, music streaming, cloud storage, and the like. However, this may change in the future.