Mastercard customers to get warnings when free trials end

Subscription-based services which offer free trials – such as magazines, gyms and streaming sites – will be required to contact cardholders before they are billed for a service under a 'continuous payment authority', which in effect is a permission to take payments regularly when needed. Firms will be required to tell customers the transaction amount, payment date and company name, along with explicit instructions on how to cancel the trial.

If customers don't cancel the trial and move onto a paid service, they will then be sent a receipt for every payment afterwards by email or text message, along with clear instructions on how to cancel the service.

The new system will be rolled out to Mastercard customers with credit and debit cards between April and June 2019. 

Visa says it already runs a similar scheme to this, but it doesn't specify that contact needs to be made by email or text, so firms can choose how they inform customers.

For how to avoid being caught out by free trials for paid services – and how to stop cash leaking from your bank account – see our How to cancel direct debits guide. 

Beware of 'free trials' which end up costing you cash

The MSE Forum is full of stories from users who have signed up to free trials and unwittingly ended up paying for a subscription they didn't want after the trial ended.

In 2014, MoneySavingExpert.com founder Martin Lewis dealt with the issue in his blog: The real reason why companies offer 'a month’s free trial'.

In the blog he said: "The obvious reason why companies do this is the apathy dividend – in other words, the hope that they'll gain as people simply forget to cancel for a month or two. But this is a short-term contributor to profits as there's actually a more powerful psychology at play here, which I suspect is a bigger win – let's call it the 'inertia dividend'.

"We human beings are naturally pre-disposed to not liking to lose something that we have. Many people wouldn't sign up for a movie service that they don't really need if they had to pay for it, but would for a free month's trial. They go in with a view to cancelling it when it ends, but at that point they become accustomed to it and now getting rid of it means a loss – and we don't like loss."

If you're taking up the offer of a free trial, set a reminder for yourself when the trial ends. At that point weigh up whether you really want to start paying for the service. If you don't, make sure you fully follow any process to cancel a trial, to ensure you don't pay.

What does Mastercard say?

In a blog on its website announcing the change, Mastercard said: "No one wants to be unsatisfied with a product after paying for it.

"For some consumers, a free trial is a great way to test out a new product and get comfortable with it before making a purchasing decision. And with so many merchants offering free trials, they're becoming the new norm.

"However, sometimes a free trial can unwittingly turn into a recurring subscription that is difficult to cancel. These situations can be frustrating and costly for both consumers and their banks."

What do other card schemes do?

Visa told us it already operates a similar scheme to that which Mastercard is bringing in, and it's been running for several years. But it's not exactly the same – for example, Visa leaves it up to companies to choose how they advise customers that their trial is coming to a close.

Visa also says that merchants are obliged to send a receipt after each recurring payment is made.