Opinion: Subscription Creep Could Push Consumers Too Far

In case you haven’t noticed, virtually every business in America now is desperate to get you on a subscription.

For them, it’s the ideal business model: Ongoing, consistent, predictable revenue on a product that’s easy to fall into and not so easy to get out of. Instead of a one-off purchase, they’re potentially getting a customer for life.

So it should be no surprise that subscriptions are ramping up in the finance world. You may not think of it this way, but they are already here in the form of annual fees for credit cards — which have climbed higher than ever for premium products, such as Chase Sapphire Reserve and its $795 annual cost. 

Steep, to be sure — and so to make such fees more digestible and universal, the next frontier could be breaking that up into smaller monthly payments. Indeed, monthly fees are often seen attached to cards from emerging fintechs, such as Kikoff or Netspend or Greenlight. 

While those cards are directed at demographics of modest income, no doubt financial institutions are salivating about the notion of applying subscriptions to higher-income cohorts as well.

The challenge: If you want consumers to swallow yet another fee in their lives, you have to make it worth their while by offering an array of benefits — perhaps boosted rewards, or insurance coverage, or rideshare credits, or travel concierge services, or gym membership discounts. 

And if they don’t like that tradeoff? Then you’re in danger of losing them altogether.

That’s why there is both promise and peril here. For issuers, the promise is that consumers have already been conditioned to small monthly payments — whether via television streaming services, or music, or online publications, or software — so they’re extremely familiar with the concept by now, and likely won’t object on principle.

One peril, however, is “subscription fatigue.” There are so many such charges cluttering up monthly statements that consumers have had just about enough.

Consumers are now racking up $219 a month on such subscriptions, even though they think they only spend $86, according to C+R Research. In fact there are now tracking services, like Rocket Money or Quicken Simplifi, designed to uncover all your subscriptions and even potentially cancel them.

To fend off customer grumbling about fees, the broader trend is toward instantaneous and ongoing benefits. So instead of, say, saving up 50,000 points to afford a free flight a few months down the line, an upfront fee unlocks a host of benefits right away.

Think of it as a private club granting you access to an entire ecosystem of juicy perks. And it’s true that consumers do enjoy feeling like they’re in an exclusive group.

But there are dangers here, and not just one or two. First is the economic moment we’re in: A record 55% of people say their financial situation is deteriorating, according to a new poll by Gallup.

With gas and groceries as they are, people can scarce afford any new household costs. Yet another cost, every single month, and cardholders could very well decide the payoff just isn’t worth it.

Second is the brand danger. Even more so than other areas, credit cards depend heavily on brand loyalty: People are accustomed to a particular issuer and a particular rewards system because it’s a relationship that has been built up over time.

If they start feeling that you’re squeezing them for every last dime, that relationship can be jeopardized — especially when there are a hundred other cards out there without such ongoing costs.

Third is the coupon-book complexity of such rewards systems, as we’ve seen with high-end cards. If you throw a thousand potential discounts at a consumer, you may think you’re doing them a favor.

But to them it may feel increasingly like a class project because they have to sift through it all and figure out which ones actually apply to them. That goes to show why almost 70% of rewards cardholders are sitting on unused benefits, according to LendingTree.

If your goal is not just to extend credit, but to curate an entire lifestyle for people, that’s a heavy responsibility to get it right. Are you certain they’re going to respond to that lifestyle? Maybe that’s not what they’re looking for in a card — or, if that’s the road you’re going down, maybe there’s another issuer offering a different and more attractive lifestyle. 

Either way, you’re placing all your chips on a bet that is not guaranteed to pay off.

There’s nothing wrong with experimentation and trying out how consumers respond to a monthly-fee model, no doubt with some added benefits to sweeten the pot. But the smart play is to offer it as one tier among multiple.

If the value makes sense to cardholders, then they can sign onto the idea of subscription and have some agency in the matter. But you also want to give them the flexibility to upgrade or downgrade as their situation demands, including options with no fees at all.

After all, there’s no denying that subscription fatigue is hitting every one of us — and you don’t want your product to be the straw that breaks the camel’s back.