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Mastercard crack down on ‘free trial’ payments

Gone are the days when you’ll forget to cancel your free trial and have an unwelcome lump of money whisked out of your account without so much as an email. At least, if you’re a Mastercard user, that’s a thing of the past, as earlier this year the payments giant became the first to impose a ban on these practices that can be a source of huge frustration to customers.

Mastercard users should be notified before a subscription service authorises the first bill.

How do free trials work?

It’s increasingly difficult to browse the internet or social media platforms without encountering advertising for a subscription box of some kind. From food subscriptions designed to make meal times more convenient, to stationery and beauty products, if you can dream it up it can be delivered to your door every month. The ‘free trial’ gimmick is also pretty universal, and implies that you can get your first month for free, or for the cost of a nominal payment for postage and packaging or similar. 

In theory, free trials are a great idea. You get to try before you buy, it’s hassle free and you get a great deal, right? Well, usually wrong. By making an initial payment, companies are essentially ‘verifying’ your card, so they can collect your card information, pass you through security checks and ensure that your details are legitimate. Which means they can take later payments and begin billing without seeking further consent. Often these payments are of a yearly subscription fee, which for most customers is a large sum of money they can’t afford to lose. 

Mastercard’s ‘free trial’ policy

Mastercard’s policy, which requires merchants to seek the approval of the cardholder before taking any funds from customer accounts, was introduced in early 2019.  Mastercard announced that from April 2019, before taking initial subscription payments, ‘free trial’ merchants have to:

  • Send a notification to the cardholder prior to taking payment detailing amount, date and details of payment and merchant
  • Include clear instructions on the cancellation process
  • Provide a receipt after each payment, reiterating cancellation details
  • Clearly label all transactions and include contact details on the customer’s bank statement

The Mastercard announcement stated that companies are ‘required to send the cardholder – either by email or text – the transaction amount, payment date, merchant name along with explicit instructions on how to cancel a trial.’ Although this doesn’t mean they can’t take it if you do nothing, at least the ‘frustrating and costly’ risk of totally forgetting you signed up is greatly reduced – something that will be a great relief to less organised shoppers!

Merchants are required to provide a receipt after each payment is taken, in email or text form, which reminds customers how to cancel their subscription should they choose to. Merchants should also show clear identifiers to appear on customers’ statements, including contact details or URL to enable simpler cancellations.

The restrictions apply to physical products such as healthcare or beauty product subscriptions – but not to digital subscriptions to TV or Music streaming services, software, or other online subscriptions. 

Accompanied by similar security measures, such as the Royal Bank of Scotland calling users when unknown payments associated with scam retailers are taken from their accounts. 

If you have had a payment taken from your account you did not authorise, contact the merchant in the first instance, then your bank, and finally the Financial Ombudsman Service should this not immediately resolve the issues.


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