A Positively Awful Problem: Negative Options

This is how companies literally nickle-and-dime you death.

Lori Pollack of ACCPros

Lori Pollack is executive director of the Association of Credit Counseling Professionals, a membership organization that promotes ethics and education in the industry.

Consolidated Credit is a proud member of ACCPros and asked Pollack this question: What’s the most annoying credit card trick that unscrupulous companies are using these days?

Here’s her answer…

Here’s something we’ve probably all fallen prey to: Having given a credit card for a purchase that we thought was a one-time deal. Time passes and you’ve forgotten about the charge.

Then one day, you notice a charge on your credit card. You’re not really sure where it came from or what it’s for, but it’s only $10. So you let it go.

Then next month, it’s there again. You finally look into it and learn the charge is for a computer repair service you signed up for last summer –  but you thought the service was only for a year.

So why are you still getting charged?

It’s called “negative options”

You’re getting charged because you didn’t stop it, and the service provider gambled on the fact that you may never stop it – and that you wouldn’t notice the $10 monthly charge.

You almost didn’t. So you call the provider, and they politely cancel the subscription for the repair service you didn’t know you had.

What about the magazine you want to try but really don’t want the subscription? You just saw the ad for a free trial.  But in order to get your free three-month trial, you have to supply your credit card information. Well, there’s nothing free when you’ve given your credit card number.

Yes, you’ll have the right to cancel if you don’t want to continue the subscription. Again, the magazine company is betting that by the time the charge hits your credit card bill, you’ll either like the magazine enough to continue or not notice the charge at all and just let it slide.

There’s actually a name for this: negative option, whereby without authorization, consumers’ credit cards are continually charged.

How this tactic hurts us all

Very recently, a U.S. district court stopped a group of marketers in California and Nevada from conducting business using “free” trial offers that the Federal Trade Commission believes are deceptive and illegal. The defendants allegedly tricked consumers into giving their credit/debit card information, and as described above, enrolled them in their product without proper authorization.

Four months ago, I purchased my first iPhone. (I know, welcome to the 21st century!) I thought it would be prudent to take the insurance in case of damage or loss. For $10 a month, better safe than sorry, right?

I opted not to take the insurance offered through my carrier but rather through an independent provider, which would be billed to my credit card. Last month, I noticed the charge to my credit card and to my phone bill. When I looked at a prior month’s phone bill, the charge was there as well.

I immediately got in my car and drove to the store where I purchased the phone. I added a new service to my phone a couple of months ago, and the salesperson in the store somehow added the insurance to my account. It’s all been straightened out, but it just goes to show how on top of things we all need to be.

So don’t forget to review your credit card statements each month – it could literally save you big bucks!

Consolidated Credit supports open and fair financial practices. Read all about your Consumer Credit Rights.