Why We Rarely Opt Out
How annoying. For the third month in a row I circled a ridiculous and unnecessary charge on my credit card bill. I had been meaning to unsubscribe from this site months ago, but hadn’t pulled the trigger. I call it a dummy tax because I’m a dummy for not canceling the subscription.
Six months ago, I had subscribed to a website in order to capitalize on a “special offer” to download a free book. The first three months of the subscription were free and I could opt out any time. After that, they would charge my credit card a nominal monthly fee.
I read some of the book, but quickly realized it wasn’t for me. Then I completely forgot about the subscription to the website. I haven’t visited it since. Three months later, I saw a charge on my credit card statement for the membership to the site. “Oh, yeah,” I said. “I’ve got to cancel that.” But, I didn’t.
Rinse and repeat… three times.
I just received my third charge for membership to a website I don’t visit, for information I don’t need, for tools I don’t use.
My friend Van and I had lunch the day I discovered (or rediscovered) my third dummy tax for that website subscription. I told him about my dummy tax and we had a laugh over it. While we were talking I remembered three other auto-renewal subscriptions I had paid for earlier in the year, but never canceled. On my way home, I remembered two more. What’s going on here?
How much money do I waste each year by failing to opt out of subscriptions or memberships that I don’t need? Why don’t I simply cancel them?
It has to do with the Status Quo bias (aka inertia). In their famous book Nudge, Richard Thaler and Cass Sunstein call it the “yeah, whatever” heuristic. It simply means that we are not motivated enough to change the situation. The membership charge wasn’t painful enough for me to take immediate action; so, I procrastinated until I was charged again. And again.
Thaler and Sunstein put it like this: “When people have to make a phone call to cancel (or in my case a visit to a website), the likelihood of renewal is much higher than it is when people have to indicate that they actually want to continue to receive the magazine.” In other words, we rarely take the action to opt in or out. We tend to go with the default option.
When the default option is to renew, we renew at a high rate. Conversely, if we have to take action to renew something, we rarely do. Sophisticated influencers set the default option to continue whatever it is we originally signed up for because they know how rarely we opt out of an auto-renewal.
Sometimes auto-renewal is beneficial. For example, many people would fail to sign up for their annual healthcare insurance program or “opt in” to regular 401k contributions. Making this decision automatic means it is a no-brainer for the employee. “Consumers may feel, rightly or wrongly, that default options come with an implicit endorsement from the default setter,” wrote Thaler and Sunstein. This must be the right option for me because it is the one the "experts" recommend. In some cases, this is true.
On the other hand, I pay for six subscriptions I don’t need on a regular basis because I’m simply not motivated enough to cancel them. Thankfully the credit card company issues new cards every so often, which consequently purges my unwanted auto-renewals… but not before I’ve paid a few unwanted charges.
Be aware of the status quo bias. We are all susceptible to it because we are prone to inertia. Our busy, hectic, modern lives force us to prioritize our time on things we truly care about and neglect things of lesser importance. Unfortunately, we are left paying for unwanted subscriptions and memberships. And the costs add up.
The question isn’t, are you paying a dummy tax? It’s how much are you paying?