The nickel-and-diming of American credit cards

By , CardRatings contributor

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Last year, 35 percent of Americans spent an average of $215 on their debit and credit cards without even knowing it.

The money is part of a nearly $15 billion problem with gray charges. According to a report report commissioned by BillGuard and conducted by Aite Group, gray transactions are those a consumer did not intend to make. They may be "free" trial subscriptions that end up not being so free or auto-renewals consumers did not realize they were authorizing.

Common types of gray charges

The report estimates consumers paid a total of $14.3 billion in gray charges in 2012 while card issuers spent $562 million in servicing costs related to the charges.

The report breaks these charges into 11 categories. If you aren't sure where some of the fees on your card fit in, consider these five common types of gray charges:

  • Free-to-paid ($6.1 billion): Occurs when a free trial of a product turns into an automatic charge if the item is not returned or the customer doesn't proactively cancel a service.
  • Phantom ($2.5 billion): When additional products or services are tacked onto a transaction.
  • Service and luxury fees ($997 million): Fees that are assessed to give customers access to certain products such as bank accounts and special card processing services.
  • Zombies ($826 million): Charges that keep appearing even after a membership or subscription has been cancelled.
  • Unintended subscription ($707 million): Fees that are the result of a one-time purchase that unexpectedly turns into an ongoing subscription.

The average gray charge was $61, but 34 percent of those affected incurred charges between $100-$499. Of those who received gray charges, 38 percent had only one, but 10 percent encountered 11 or more charges on their accounts.

Keeping your credit cards safe

If you want to avoid gray charges, try these strategies:

  • Scrutinize the fine print whenever signing up for a trial offer or free product. Do you have to cancel within a certain time period to avoid future charges?
  • Think twice before checking that box. Shady merchants get consumers to agree to phantom charges by offering extra items or services during the checkout process. They are counting on customers clicking on boxes without paying attention to what they say.
  • Carefully review your monthly statement. If you see unauthorized charges, contact the merchant to request a refund or, if that fails, file a dispute with the credit card company. However, be aware that card issuers may not refund money for a subscription unless it is one you have already cancelled.

Some gray charges may be unethical but most are not illegal. Until the law catches up with shady marketing practices, the only person who can prevent these charges from appearing on your credit card statement is you.


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