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Mastercard no longer allows vendors to auto-renew customers after free trials

Mastercard lets you try free trials without the hassle (Getty)

It’s hard not to be seduced by free trials. But if you forget to cancel, giving in to curiosity can cost you down the road. Mastercard says it’s found a way to protect Canadian consumers from being caught off guard by recurring charges.

If a consumer signs up for a free trial of a physical product like skin care or vitamins, billing can’t continue once the trial period is over. Services like free internet aren’t included.

Mastercard (MA) told Yahoo Finance Canada the reason for putting these rules in place for physical goods is because historically they have seen most issues occur in this space. Whereas, online subscriptions traditionally are quite explicit and ask people to opt in.

Merchants will be forced to get cardholder approval at the end of the trial before they start billing. They will have to send an email or text with the transaction amount, payment date, and merchant name along with explicit instructions on how to cancel a trial.

“Free trial offers can be a legitimate and useful way to increase sales and improve consumer satisfaction,” Mastercard says in its announcement.

“The new policy is meant to “increase transparency and ensure an outstanding experience for cardholders.”

Even if the consumer decides to pay and continue the trial — the merchant will have to send a receipt for each transaction. Cardholders will also receive clear instructions on how to cancel the service. Charges that appear on statements must include the merchant’s website, phone number, and location the purchase was made.

“I think this is a great example of an incremental service improvement being offered by a well-established brand,” Marvin Ryder, marketing professor at the DeGroote School of Business, told Yahoo Finance Canada.

Ryder says the move reduces the risk of customers getting caught in a negative billing trap. In other words, you have to tell the company to stop sending you the product by a certain date. If you don’t you’re on the hook for it.

“I have heard dozens of horror stories of people who feel they were trapped by negative billing. While ultimately they can stop the subscription and the payments, usually they end up buying more or paying more than they intended,” says Ryder.

Consumers who aren’t Mastercard holders can still complain and try to get subscriptions stopped. In some cases, they can even get their money back. Ryder says it’s best to avoid that type of situation altogether.

“I try to avoid negative billing situations at all costs even if it means passing up ‘once in a lifetime’ deals,” says Ryder.

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