Even financial experts like myself can fall pray to scams. A few years ago, I was doing research on the best ways to rehab your credit score. I signed up for a few different websites to check my score online…but one in particular, freecreditreport.com, made it so difficult to cancel that before I knew it I had racked up $200 in monthly fees that I didn’t even know I had signed up for. You see, I signed up for the “monthly trial”—but had to enter my credit card information to get it, and the company kept charging me month after month. I emailed to cancel but never heard back, so I called—but couldn’t get an actual human on the line! After weeks of anxiety and stress I finally got them to cancel my subscription and give my money back, but it took a ton of persistence…and I would have rather had just avoided the whole ordeal in the first place. Lesson learned.
They flood your inbox under the guise of convenience: gym membership offers, cable/phone/internet deals, free credit reports. And while they might seem legit, they’re also awfully good at talking you out of your money. Here are five scams to look out for to avoid a paycheck disappearing act:
1. Auto bill pay: …But it’s so easy! Yes, automatic bill pay can be nice; you don’t have to worry about forgetting to pay your bill and suffering a lapse in services. But the problem is that you don’t see this amount coming out of your bank account every month, so you’re not adjusting to months when that paycheck is stretched a little too thin. Plus, auto bill pay “gets” you by automatically deducting payment for a service long after you’ve stopped using it. (How many of us have kept mindlessly paying for monthly magazine subscriptions only for those mags to end up in the recycling bin??) If you’re not looking at how much you’re paying for certain services, you also may not think to negotiate to get a better rate.
2. Membership: Gym memberships, studio memberships—anything that makes you pay a set fee per month—mean that you’re paying for a service even when you’re not using it. It’s nice to know you have unlimited use of the service, but unless you’re an Olympic hopeful or serious Yogi you’re probably not getting your money’s worth. And what about those months when you don’t use the gym or studio at all, like in the summer when you’re running outside or in December when you’re away for the holidays? Better to stick to “pay-as-you-go” plans. Purchase a pack of 10 or 20 sessions (bonus: sites like LivingSocial and Groupon regularly offer these at a discount), use them all, and then buy more.
3. “Pay Later” programs and high interest-rate credit cards: Any program that allows you to pay later really is too good to be true; you’re going to end up paying an arm and a leg in interest when the bill finally comes (which it always does.). It can be tempting to go for these when you want it now (that new couch, that car, holiday shopping…) but those purchases are going to cost you later; watch as a $45 blouse plus interest suddenly costs $100!
4. “Free” credit reports: Watch out for gimmicks (freecreditreport.com being one of them!) which will loop you into a monthly membership program with a “free” initial report, but then make it almost impossible to get out of the monthly fee. We like annualcreditreport.com for a free report (remember, you’re entitled to one free report per year) or invest the $19.95 in myfico.com (trust us, it’s worth it) and gain access to useful advice on how to boost your score. The same goes for driving record reports, health insurance premium checks, etc.—basically any monthly financial “check-up.” Read the fine print before you get trapped by hefty monthly fees.
5. “Bundle” programs: These seemingly convenient packages make you pay a lump fee for services (cable, phone, and internet being the best example) but if you want only a few of these services, not all, you can actually end up paying more to get out of them. And if you plan to move in the next year or two? Forget about it; these are tough contracts to break without paying major cancellation fees. Don’t get sucked into paying for services you don’t use. Instead, look for plan that offers a short-term contract and allows you to select services a la carte.
Save your sanity and your wallet from these scams by remembering to always, always read the fine print. And even if you aren’t getting outright scammed, make sure you’re getting the best deal by checking in with your bills (cable, internet, credit card, etc.) at least twice a year and asking for a better rate. The worst thing they can say is “no!”