Is The Subscription Service Boom a Boredom Savior or a Budget Bust?
The convenience and easy access of subscription services at home has created a boom in new subscribers during the COVID-19 pandemic. While using subscriptions can save money on gas and going out to eat, the auto-renewals of subscriptions may bust some household budgets.
To find out if the latest spike in subscription services is indicative of the future for the entertainment and retail experience, and how it is impacting consumer spending, LendingTree surveyed 1,201 consumers and interviewed experts to find out.
1 in 3 Americans purchased a new subscription as a result of the COVID-19 pandemic
According to a recent LendingTree survey, 1 in 3 Americans have purchased a new online subscription as a direct result of coronavirus-related circumstances. On average, consumers have spent $192.30 per month on these new subscription services, which is a drastic increase from the average of $50 in pre-pandemic months.
The top reason for new purchases? Entertainment. While credit cards are offering subscription savings, the dramatic increase in spending may be causing more harm than good.
The automation of subscription renewals makes it easy to forget those charges are being added to your credit card bills each month, and if left unchecked, they can add up and quickly balloon into credit card debt.
However, these past few months can be seen as anything but typical in terms of consumer spending. Even credit trends during COVID-19 diverge from what industry experts would expect during economic uncertainty.
For some of the lucky ones, working from home, an economic impact payment, also known as a stimulus check, and increased unemployment benefits may have resulted in extra cash in consumers’ budgets. Splurging on subscription services while retailers remained closed or limited may make sense in the short run.
Households without children spend 3x more on new subscriptions
While 60% of parents admitted to purchasing a new subscription service to entertain their children, consumers with no children spent triple that amount. Given that schools have gone virtual in the recent months, the uptick in subscription spending is understandable for parents. Still, having dependents drives parents to find ways to optimize spending for their family.
Meanwhile, consumers without children have more room in their budget, and can more easily overspend.
Key insights from budget and retail experts
To weigh in on the benefits and precautions with new subscription spending, LendingTree turned to influencers who focus on lifestyle blogging, product recommendations, and parenting. The following insights can help consumers decide which subscriptions to keep or cancel.
Try new things, but evaluate often
Michelle Schroeder-Gardner, founder of Making Sense of Cents , points out that the variety and the ability to try new things makes subscription services so attractive.
Naturally, being home more leads to feeling the need to have something new to break up a monotonous routine. A new subscription service can provide that novelty, and not only for entertainment.
But how can consumers make sure their subscription spending is worth it? Constant evaluation. Needs and interests change, so it is important to make sure active subscriptions align with those changes. Plus, you’re likely already evaluating costs in other areas of your life to make sure you are getting the best deal, and subscription services are no different.
“I recommend simply sitting down every few months and auditing your subscription services so you can see if you are getting a good value for the money you are spending. If you haven’t used the service in over a month, then you may want to cancel it altogether or try to pause it.”
– Michelle Schroeder-Gardner, Making Sense of Cents
Make sure it fulfills a regular need
Staying at home more means finding different ways to fulfill daily needs. Louida Martin, the founder of Product Review Mom, sees the value in food and streaming subscriptions because they provide nourishment and entertainment for the whole family. She also factors the savings from staying in.
Consumers actually are saving money in the long run since outdoor entertainment costs more when you factor in event tickets, food, parking, gas, etc.” says Martin. Other categories of helpful subscriptions include health and beauty.
To find if a subscription is worth it, Martin encourages consumers to ask if the service fulfills a category of a regular need and how often it is used by the family.
“Regularly check what subscription services your children use. If they haven’t used one in a while, consider canceling it. My daughters enjoy watching movies, and with Netflix, they have a library of shows and movies for them to watch with new releases. Netflix is used by my whole family, so it’s a valuable subscription service to have for us.”
– Louida Martin, Product Review Mom
Talk with family and set reminders
Households with families need to consider everyone’s needs when deciding on subscriptions to continue or cancel. Lydia Beiler, founder of Thrifty Frugal Mom, takes into consideration the different needs and interests among her family members, which can be challenging.
To solve this issue, Beiler encourages having a family conversation to find out if a subscription brings value in the form of saving the family money, improving health, or allowing for more quality time together.
Another way Beiler avoids overspending on subscriptions is by setting a phone reminder before a subscription renews.
“I recommend setting a reminder on their phone a day or two before the subscription renews. Use that reminder to assess whether or not the service is worth continuing. If it’s something that family members are using, have a conversation with them to see if they actually use it and like it. If it is being used, evaluate if the amount of time that it’s used is worth the expense.”
– Lydia Beiler, Thrifty Frugal Mom
Check the cancellation policy and track usage
Allison Baggerly, founder of Inspired Budget, says that subscriptions give her more time with her family and saves sanity.
With many subscriptions related to health and family entertainment, it is easy to sign up multiple new subscriptions at a time. Allison warns, however, that the risk of potential job loss during the pandemic should make consumers careful before signing up for new subscription services.
That’s why it is important to review the cancellation policy of the service before signing up. The last thing you should have to worry about is a cancellation fee if you need to quickly cut down expenses. How to figure which services to cancel? Allison advises finding out the subscriptions families actually use by using apps to track the usage.
“The easiest way is to use the Notes app in your phone (or even grab a piece of paper and pencil) and list out all your subscriptions. Then, tally or write the date that each one is used! Another idea to track your digital subscriptions such as apps is to look at your screen time and app usage on your phone. This a great way to see exactly how much time is spent on subscription apps.”
– Allison Baggerly, Inspired Budget
While subscription services are nothing new, they have certainly attracted new customers during the pandemic.
As states slowly open up and Americans leave their homes again, subscription service spending will likely decrease. However, they may not go back to pre-pandemic averages.
With proper evaluation using the tips from product influencers and lifestyle bloggers, consumers may find certain subscription services worth continuing. Ultimately, consumers need to make sure that the convenience of a subscription renewal doesn’t override the importance of purchasing only services that bring proven value to their household.