When “Free” Costs You Cash

Consumers will always be attracted to free things. Whether it is giveaways, trial offers, or totally misleading, free still attracts attention. Misleading ‘free’ tactics are being used more and more, particularly online, and those tactics are costing consumers a lot of money.

Companies that use the incentives to attract consumers to sign up for free offers also require them to enter a credit card number to qualify. This tactic is often referred to as negative option marketing, meaning that consumers will indeed get their free trial offer period but if they fail to cancel their registration once the free trial has ended, their credit card will be charged each month until the consumer cancels it or takes further action. Consumers may benefit from the initial free trial provided they remember to cancel that service. Otherwise, the savings that have earned will be for not because of the mounting interest charges if you do not regularly pay your balances in full.

The Better Business Bureau receives thousands of complaints each year from consumers who feel as though they have been taken advantage of by a scam artist. The Federal Trade Commission recently got involved to investigate negative option tactics. So far, this type of marketing is not illegal but it is considered to be misleading. Many consumers fail to read the very fine print that states the trial period only lasts so long but you will continue to receive and pay for each additional shipment your receive until you otherwise cancel. For instance, a product is offered for free but may be accompanied by shipping charges. You pay the shipping, receive the product and two weeks later another product arrives in the mail. You discover at the end of the month that your credit card was also charged. If you are not aware of the situation, your credit card can incur several weeks of charges before you receive your statement.

There are other ‘free’ offers that operate a bit differently but are still confusing for consumers. There are offers when you sign up to receive a free product, you are automatically enrolled in a service you didn’t want. Unless you opt out, which most people are not aware of, you will be responsible for paying the bill until you cancel. Because not everyone reads their credit card statements faithfully each month, the charges often go through for an extended period of time before you even notice.

You can protect yourself from getting involved with negative option marketing by doing the following:

1. Check the company out with the Better Business Bureau. Look for any complaints filed against the company and what the complaints entail.
2. Don’t sign without reading the details first. Read the terms and conditions of the offer before signing up. Seek out the fine print. Remember, the smaller the print, the more important that it is to read.  Grab a magnifying glass if you have to but make sure you know what it says. Ask questions directly to the company about anything you are unclear on or that do not make sense to you. Get specific answers.
3. Analyze your credit card statement each month. Since some of the charges may seem insignificant, they can be easy to miss unless you are reading every transaction line. Do this regularly and stay in the loop concerning each and every item that you’re paying by credit card. If you see any charge you dispute, contact the credit card company as soon as possible to report the issue.
4. If you notice a company is charging you fees for services or products you haven’t received or wanted to receive, contact the company right way and cancel. Find out what you need to do to confirm money will no longer be coming out of your account and even try to negotiate a reversal of the charges. Don’t expect it will happen for certain but you have to start by asking.

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This entry was posted on Saturday, July 4th, 2009 at 4:26 am and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.