"Click to Cancel" will help us manage money, if it doesn't get canceled

Have you ever forgotten about the streaming subscription you no longer need or use? You're not alone. 

A survey from C & R Research reveals that 74% of respondents feel it's easy to forget about recurring monthly subscriptions, and 42% have forgotten about a recurring monthly subscription they no longer use but still pay for. Interestingly, 55% of Gen Zers have let their monthly subscriptions fall by the wayside but still pay for them, versus 24% of baby boomers. 

So, how much are consumers spending on subscriptions? They estimated $86 per month, but when they calculated it, the total came to $219 per month, according to C&R Research. 

Companies also make it difficult for consumers to cancel their recurring subscriptions and memberships. Have you ever tried to cancel a subscription, only to find yourself lost in a confusing maze of steps? Or thought you had canceled, only for the charge to pop up on your credit card statement? 

The Federal Trade Commission's "Click-to-Cancel" rule aims to make it as easy to cancel a subscription as it was to sign up. Plus, the new rule prohibits companies from misrepresenting any facts and ensures that important information is truthful and easy to find. 

That said, the rule faces some uncertainty. Passed during the Biden administration, it went into effect as of Jan. 14, and companies have until May 14 to comply. But it faces legal and political hurdles under the Trump administration that could deter the FTC from enforcing it.

Why is it so hard to cancel?

In personal finance, there's the saying, "Make it easy to do the right thing, and hard to do the wrong thing." In other words, create systems and rules that encourage positive money-building habits. 

But companies have devised ways to make it easy to sign up for a monthly box subscription but have put barriers in place to cancel. These barriers are known in behavioral economics as "friction," said Dan Ariely, a psychology and behavioral economics professor at Duke University and a founding member of the Center for Advanced Hindsight. 

"Companies will create websites that reduce friction when you sign up but increase friction when you want to cancel," he said. In trying to unsubscribe, many websites add friction, which creates difficulty canceling," said Ariely. "It might be an additional key press, field or demand of time." 

According to Ariely, examples of friction to make it challenging — and a bit deceptive — to cancel include: 

• Even if you went through the steps to cancel your subscription, you didn't really cancel.
• When you click on a button, it takes you to a website where you need to indicate your reason for canceling. 
• You need to input a password before you can cancel. 
• You need to type "delete" in a field before properly unsubscribing. 
• You can subscribe online, but to cancel you'll need to call. 

Every website has a different unsubscribe mechanism, which means that we have to learn that mechanism, Ariely said.

Another tactic? Companies may auto-renew you without reminding you of your renewal date, said Scott Rick, an associate professor of marketing at the University of Michigan's Ross School of Business and author of "Tightwads and Spendthrifts."

Plus, if you subscribe to an annual plan — usually offered at a discount — you might be stuck with a subscription that you end up not using or needing down the line. "One quiet annual payment is easier to overlook than 12 monthly payments," said Rick. 

Making a habit out of canceling subscriptions 

While the effectiveness — and the enforcement — of the "Click-to-Cancel" rule remains to be seen, it's good practice to get into the habit of taking inventory of your subscriptions and canceling the ones you no longer need or want. 

Track your spending on subscriptions. To keep tabs on what subscriptions you have and are spending on, create a category designated solely for subscriptions, says Brett Croft, a CFP®, CFA®, CTFA and owner of Croft Financial Planning. "The simple act of tracking changes your spending habits," he said. 

From there, decide which ones to cut based on usage or substitution, he said. You can see what subscriptions you no longer use or need or go about finding a less-expensive or free alternative. 

Take stock of your existing subscriptions. Said Israilov, a certified financial planner and founder of Israilov Financial, suggests breaking down your recurring subscriptions into a few sub-categories. 

These can include trial subscriptions switched to paid plans (e.g., annual app subscriptions, streaming apps), redundant music and video streaming services, annual subscriptions on auto-renewal and premium features that can be downgraded to free versions. 

Add reminders to your calendar. Rick recommends making this a quarterly event, where you take stock of your subscriptions and jot down "Cancel Hulu" on your to-do list. 

Sign up for fewer subscriptions. Rick suggests making a point to sign up for fewer subscriptions in the first place. "Given inertia and the typical invisibility of subscription payments, you're probably committing to a much longer subscription period than anticipated," Rick said. 

Use the Marie Kondo decluttering approach. If it's not giving you joy, or you no longer or hardly use a subscription, cut it, recommends Alvin Carlos, a CFA, CFP® and financial planner and managing partner of District Capital Management. 

Use money saved from canceled subscriptions to improve your financial situation. As Croft explains, use the cash saved to "make your ship bigger." 

For example, create a long-term net worth building subscription, he said. You can open a brokerage account at Vanguard and then divert the funds saved from a canceled subscription into an equity mutual fund or ETF. 

A significant move for consumers 

Subscriptions can easily creep into our budgets, and those small, recurring charges add up over time, said Daniel E. Milks, a CFP® with the financial planning firm Fiduciary Organization. "A $10 or $15 charge may not feel significant, but when you look at the bigger picture, it can amount to hundreds — or even thousands — of dollars annually," he said.

"With so many subscription services these days, it's easy to lose track of what you're paying for. This rule helps simplify the cancellation process, empowering people to better manage their finances," he said.