MasterCard Makes Ending Free Trials Hassle-Free

Feb 14, 2019

MasterCard announced new guidelines to stop merchants that hoodwink consumers into signing up for paid subscriptions by luring them in with free trials. The goal is to make the process of cancelling subscriptions for those that started as free trials simpler.

Understanding the New Guidelines

Starting April 12, merchants that accept MasterCard must get the cardholder’s approval at the end of a physical product free trial before they begin billing them for paid subscriptions. Merchants will have to contact customers via email or tax, notifying them of the payment dates, purchase amounts, that the trails are ending, and how to cancel the memberships. The intention is to make it hassle-free for customers to cancel subscriptions.

If a customer chooses to continue receiving a product after a trial, a merchant will still have send an email and text after each payment thereafter, according to the new rule.

Also, the cardholder’s statement must now include the merchant website URL or the phone number of the store where the cardholder made the purchase, as well as the charges.

Why This New Rule Is Necessary

Americans lost more than $1.3 billion to free trials offered by merchants, according to the Better Business Bureau. The Federal Trade Commission has gone after these same merchants for fraudulently offering these trials.

Free trials may be great ways to get customers to try a new hair serum or moisturizer. However, many merchants use free trials of products to hook consumers into paid, monthly recurring subscriptions.

This has become a major problem due to the rise of free trial offers on the web and social media. Also, it is difficult to keep track of these types of fraud since many times the charges are small and go unnoticed for long periods of time. However, a small charge each month for multiple months can mean a major financial hit for customers. Finally, once subscriptions start, they are very difficult to cancel, resulting in frustrating and costly charges.

The new rule aims to boost transparency and ensure improved experiences for cardholders.

What Is Not Impacted by This New Rule

MasterCard’s new guidelines only apply to tangible products. Therefore, it does not impact free trial subscriptions for services, such as video streaming or software. Also, merchants only need to adhere to this new rule for customers who sign up for free trials beginning April 12. It does not impact any customers that have already signed up to try products at no charge. MasterCard will use consumer reports to ensure merchant compliance.

Other Companies Helping Consumers End Subscriptions

Other companies, like Truebill, Capital One, PayPal, Discover, and Apple, have heard customers complaints about the difficulties of cancelling unwanted memberships and subscriptions following free trials and has stepped into help.

Apple helps users manage subscriptions through its iTunes store, and Truebill is an app that helps customers track charges and cancel unwanted subscriptions. Both payment aggregator, PayPal, and Capital One bank helps customers cancel subscriptions. Though it encourages customers to try and cancel subscriptions on their own first, Discover will step in, investigate, and reverse charges if customers have been charged for memberships or subscriptions they did not want.

States Making Efforts to Ease Membership Cancellations

In July 2018, updates to California’s Automatic Renewal Law went into effect. It forces online businesses to permit customers to cancel online recurring purchases and auto-renewing memberships. It also enacted included notifications similar to MasterCard’s new guidelines.

Though nothing has been adopted to date, Washington, D.C. also is attempting get a similar law on the books.

In Conclusion

As more companies, credit card brands, and governing bodies notice the difficulties that consumers face when they try to end free trial subscriptions, expect more entities to follow suit.

Despite the new guidelines, merchants that offer free trials as a way to gain new customers is still a smart approach, as long as it is handled with transparency and honesty.

If you are a business that grows its customer base through free trials and recurring billing and you need a solid merchant service provider, then consider eMerchantBroker.com (EMB). It specializes in working with high-risk businesses, including those that have a history of excessive chargebacks or little processing history. Applying online is simple and easy.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

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EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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