File photo of credit cards from the Detroit Free Press.
(USA TODAY) - Three weeks ago, Mallorie Sullivan, 21, saw her bank account had been overdrawn by about $70 and couldn't figure out why. Until she remembered about a free Amazon Prime trial for students she'd signed up for six months earlier.
The trial had ended, and Amazon automatically converted the Ohio University senior into a paid subscriber. Others interviewed by USA TODAY describe similar experiences with everything from magazine subscriptions to so-called "free" credit reports to video and music streaming services. And it's taking a sizable sum out of their wallets.
A new study out Thursday shows consumers are individually paying hundreds of dollars in extra charges each year for services they never wanted or meant to sign up for.
Collectively, consumers paid $14.3 billion in unwanted charges last year, according to the survey commissioned by BillGuard, an online service and app that tracks and alerts consumers to these kinds of charges and helps users dispute them. It found that one in three American card holders is hit with these "gray charges" at an average of $215 per person per year. The survey analyzed an anonymous sampling of a year's worth of credit and debit card transactions from nearly 5,000 BillGuard users.
Services that offer a free trial and then convert you into a paid subscriber are the most prevalent of unwanted charges, collecting $6.1 billion from consumers last year, the report shows. They make up nearly half of all gray charge transactions.
"These gray charges are not illegal; they're just kind of unethical and a little bit questionable," says Ron Shevlin, senior analyst at Aite Group, which conducted the survey for BillGuard. "And many times it's the consumer's behavior that triggers these gray charges."
In many cases, people forget they signed up for something, which merchants are counting on, says Mary Anne Keegan, chief marketing officer for BillGuard. And consumers often don't dispute the charges, she says.
"Usually, gray charges aren't these huge huge dollar values," she says. "When you look at the small dollar amount, most people are so busy today that it's a hassle trying to get your money back."
Of those who incurred gray charges last year, the largest percentage dealt with charges totaling $20 to $50 for the year, the BillGuard report shows. The average individual charge was slightly higher, though, at $61, likely because some of the less prevalent types of charges can be for higher amounts, Keegan says.
The prevalence of gray charges stems from consumers' increasing preference to use debit and credit cards as a payment method, as well as making online purchases, Shevlin says. Both make it easier for merchants to keep your billing and contact information on file.
Dominique Broadway, a personal finance coach in Washington, D.C., says she frequently sees clients hit with gray charges. She says they are most often "free-to-paid" subscriptions, including those from Amazon Prime and LinkedIn, which offer consumers free trials of upgraded services for a limited time, then start charging them. Companies that enroll customers in automatic shipment or renewal - like skin-care company Proactiv, which automatically sends customers new product every couple months - are also common, she says.
Shevlin hopes card issuers will soon be required to monitor the charges in some way. And BillGuard is working with the Consumer Financial Protection Bureau to supply data about the prevalence of deceptive marketing practices as part of an initiative CFPB launched last fall to encourage "consumer-friendly innovation" in the financial services industry.
"It's not heavily regulated," Keegan says, "which is the direction it really needs to take."