If you think cancelling your credit card will stop those pesky recurring charges from Netflix, think again. A little-known service used by most major credit card providers and merchants could mean your subscription keeps going, even after your card is cancelled.
How Credit Card Updater Services Work
Nearly 46% of Americans opened a new credit card last year, according to Forbes. When you get a new card, you probably assume companies like Netflix will stop charging your old card. But in reality, your Netflix subscription (and most other recurring charges) will likely continue on your new card seamlessly.
This is because of credit card updater services offered by major card networks like Visa and Mastercard. Visa introduced their Account Updater service back in 2003, allowing merchants to automatically receive customers’ new card information, including card numbers and expiration dates.
Here’s how it works: When a customer’s card is replaced – whether due to expiration, loss, theft, or switching to a new bank – the card networks use these updater services to send the new card details to participating merchants who have recurring charges set up. The merchant can then update the card on file and keep charging the customer as usual.
The Pros and Cons for Consumers
On one hand, these updater services provide convenience. You don’t have to manually update your card information with every subscription service when your card changes. Your Spotify keeps playing, your gym membership stays active, and that cloud storage keeps backing up your files without you lifting a finger.
However, it also makes it harder to end subscriptions you no longer want. In the past, getting a new credit card number was a surefire way to stop recurring charges. The merchant would get declined when trying to charge your old, cancelled card. But now, your new card gets charged automatically.
This is great for companies who rely on recurring revenue and want to reduce churn. But it can be frustrating for consumers who are trying to cut expenses and cancel unwanted subscriptions. It puts the onus on the customer to directly contact each company to cancel, rather than simply cancelling their payment method.
How to Protect Yourself from Unwanted Charges
So what can you do to avoid getting charged for subscriptions you don’t want anymore? Here are a few tips:
- Regularly review your credit card statements. Go through line-by-line and identify any recurring charges. If you see subscriptions you no longer use, contact those companies directly to cancel.
- When signing up for a free trial, set a reminder to cancel before you get charged. Companies often require a credit card up front, hoping you’ll forget to cancel when the trial ends. Don’t let them auto-enroll you.
- If you really want to end a subscription, contact both the merchant and your credit card company. Tell your card issuer to stop allowing charges from that particular company.
- As a last resort, you can completely close your credit card account, not just get a replacement card. Updater services only work when you stay with the same card issuer. Closing the account entirely will stop the charges.
While credit card updater services can be convenient for managing your subscriptions, they can also work against you when you’re trying to trim expenses. Automatic card updates mean cancelling your card is no longer a foolproof way to end recurring charges.
The key is being proactive in monitoring your statements, cancelling unwanted subscriptions directly with merchants, and enlisting your card issuer’s help when needed. With a little extra vigilance, you can make sure you’re only paying for the subscriptions you actually use and want.
As recurring subscription models become increasingly popular, it’s more important than ever for consumers to understand how payment processes like card updater services work, and to take control of their recurring charges. A little knowledge and effort can go a long way in avoiding unwanted expenses and keeping your budget on track.
