LifestyleMoney Management

How to Avoid “Bait-and-Switch” Advertising Scams Offering “Free” Stuff

Everyone loves a good deal and nothing is better than something completely free. That’s why any offer associated with the word “free”, whether it’s a free kid’s meal at a restaurant, a free trial edition of a magazine, or a free email account. , attracts customers.

The simple truth is that businesses are in business to make money. So when they give you something for free, they’re not just doing it for the sake of their hearts, they’re hoping to make some money, one way or another. And sometimes the money doesn’t really come out of your pocket. For example, when Google sells the data it collects from your millions of email subscribers and billions of daily web searches, it doesn’t cost you anything directly, it just helps businesses find better ways. to market their products to you.

But in many other cases, something that is billed as free actually has a hidden cost. It could cause you to spend more money right away, or it could lock you into a deal that will cost you money in the long run. Either way, as a savvy consumer, you need to be vigilant whenever you see the word “free” because sometimes free products can cost you dearly.

How the word “free” affects us

There is something about the word “free” that seems to bypass the logic circuits of our brain and cause us to make decisions that are really not for us. In his book “Predictably Irrational,” behavioral economist Dan Ariely gives several examples of how the word “free” causes consumers to behave irrationally.

In an experiment designed by Ariely, a temporary candy stand was set up on a college campus. Students had the option of buying a Lindt Truffle, a gourmet treat that normally sells for around $ 0.50, for just $ 0.15, or get a Hershey Kiss worth around $ 0.05 for $ 0.01. Unsurprisingly, 73% of passersby decided truffles were a better deal.

But when the experimenters lowered the price of the two items by a dime ($ 0.14 for the truffle and free for the Kiss), the percentages suddenly reversed. Now 69% of students found the free Hershey Kiss more appealing than the truffle, even though the truffle was $ 0.36 less than its retail price and the Kiss was only $ 0.05. . The testers repeated the experiment several times, experimenting with different prices, and each time the word “free” led people to make a different decision than they had made about money, even one. small amount of money.

On his blog, Dan Ariely offers several more examples of how the word “free” prompts consumers to make hasty and even dangerous decisions. For example, he explains how from 1968 to 2010, the Danish government offered voluntary sterilization surgery as a free service to all of its citizens. He then decided that starting in 2011, he would start billing for the procedure: around $ 1,300 for men and $ 2,500 for women.

When the government announced the next change in 2010, the rate of people seeking sterilization suddenly quintupled as citizens rushed to undergo the procedure while being able to do it for free. Some may have already planned to undergo the procedure, but it is very likely that some have never thought about sterilization before. However, when they realized that it would only be free for a limited time, it suddenly struck them as an opportunity that should not be missed.

Likewise, Ariely describes what happened at a nightclub in New York City that, for just one night, offered free tattoos to patrons. Of the 76 customers who opted for the tattoo, 68% said they wouldn’t have got a tattoo if it hadn’t been for free.

When free is not really free

While you can’t let a free offer lure you into unscheduled surgery or an impromptu tattoo, there are many subtle ways the word “free” can trick you into making decisions that hurt your wallet. Here are some examples of so-called free things that can have hidden costs.

1. Free delivery

The Amazon Internet Hypermarket offers free shipping to customers on certain orders. To qualify for this offer, you must purchase $ 25 or more of “Qualifying Books” or $ 49 or more of all “Qualifying Items”.

At first glance, this seems like a definite money loser for Amazon. After all, shipping is not free for them, and the larger the order, the more it costs, so free shipping for large orders must cost the company a lot of money. And it does, but in the long run Amazon ends up making more money on additional purchases than it loses on shipping.

Providing free shipping generates business in part by making Amazon more attractive than its competition, which makes you more likely to choose Amazon when shopping online. But also, offering free shipping on orders over a certain price limit makes it more likely that you will order additional items to avoid shipping charges. For example, if you want to buy a book that costs $ 14.95, but shipping would add an additional $ 5, you may decide to purchase a second book that costs $ 12.95 to go over the $ 25 limit in order to be able to send it for free. It’s good for Amazon, but not so good for you, because you end up spending $ 7.95 more than you would pay for shipping, and end up with an extra book that you don’t really need. .

If you thought that no one would buy a book that they just didn’t want to get free shipping for, think again. In “Predictably Irrational,” Ariely notes that Amazon sales skyrocketed when it started offering free shipping on large orders, but not everywhere. In France, where Amazon reduced its shipping costs to 1 franc (about $ 0.20) instead of reducing them to zero, orders did not increase significantly. Even though 1 franc was still an insignificant cost, it was not “free”, so it did not encourage people to buy more.

One way to get around Amazon’s free shipping trap is to shell out $ 99 per year for an Amazon Prime membership, which includes free shipping on all orders. Unfortunately, this deal can also result in overspending. First of all, since you no longer need to pay the shipping cost, it’s easier to give in to an impulse buy. Second, since you’ve already spent the $ 99, you’re tempted to buy and ship as many items as possible to make sure you get your money’s worth with your membership.

This does not mean that it is always better to buy one item at a time from Amazon and pay the shipping cost in full. For example, if shipping costs $ 5, but adding a $ 2 item to your cart makes it free, then obviously you will get away with it. The point is, you need to do the math for each individual purchase and look at the total cost (goods plus shipping) for each option, rather than being distracted by the shiny word “free”.

Alternatively, if you don’t mind waiting a bit to place your order, you can just put the item you want in your shopping cart and sign out. Then the next time you want to make a purchase from Amazon.com, you can add the new item to your cart and see if the total is now high enough to give you free shipping. If so, you’ve just saved a few dollars. Otherwise, you still have the option to pay the shipping cost or add a third item.

2. Free accounts

Banks often attract new customers with the promise of free checking accounts. The ability to avoid paying monthly maintenance fees seems like a no-brainer, until you take a look at the fine print. In many cases, these accounts are only free if you meet certain conditions, such as maintaining a minimum balance, using direct deposit, or making a certain number of purchases with your debit card. And on top of that, these “free” accounts are often billed along with other bank charges, like overdraft fees and ATM fees.

The word “free” can also end up costing you more when paired with a credit card. Suppose you are given a choice of two cards: a card with an annual fee of $ 50 and an interest rate of 10%, and a “free” card with no annual fee and an interest rate of 25%. If you never have a balance on your account, the no annual fee card is definitely a better deal. But if you only make the minimum payment each month, the “free” card will likely end up costing a lot more in additional interest than the $ 50 a year it would pay for the other.

To avoid paying too much for a free account, you need to read the fine print and make sure you know what you really need to do to get the free rate. If you don’t mind maintaining, for example, a minimum balance of $ 5,000, that’s fine, but important to know, in order to prevent your balance from getting too low and charges being applied to you. And if a “free” credit card comes with a higher interest rate, throw in some numbers and find out if it’s really a good deal for you.

3. Free trials

The free trial is one type of offer that can really cost you money. This is when, for example, a company gives you a free sample of a product, like acne cream, magazine, or cheese of the month. If you like the sample and decide to sign up for the long haul, it’s good for you and the business.

The problem arises when you don’t like the sample, or at least you don’t like it enough to pay for it on an ongoing basis. If you don’t remember to call or write the company and cancel your subscription, you’ll start receiving the same product and be billed for it month after month. Sometimes instead of billing you, the company just charges your credit card automatically, so if you don’t check your credit card statement every month, you might not even notice that you are paying for something. thing you never wanted. And even if you think about opting out, companies don’t always make it easy for you.

To avoid being limited by a free trial offer, be extra careful before signing up. Make sure you know exactly what you’re agreeing to and exactly how to cancel. To be sure, search the internet to see if other people have had trouble canceling a contract. Then, if you still decide to take the free trial, write it down on your calendar when it expires so you don’t forget to cancel if you want to.

4. Free gifts by courier

Not all mail order giveaways are free trials; some are gifts. Unfortunately, many “free gifts” given by mail are not really free because they incur shipping costs.

For example, a website offers so-called free jewelry, except that all customers have to pay a “shipping and handling charge” of $ 6.99 for each piece. The coins available are quite cheap, and if the website offered them for $ 6.99 apiece, even with free shipping, many people might not look at them twice. But saying they’re free makes it sound like a good deal, even if it isn’t.

So when you see an offer for something that you can receive in the mail for free, read a little further to see if there is any shipping and handling charge. If so, ask yourself: Would you be willing to pay this amount for the same item in a store? If the answer is no, then this is a “giveaway” that you can ignore.

5. Free gifts with purchase

A friend of mine spent a few summers working as a vendor at a Renaissance fair, selling pickles on a stick. One year, to spice things up, he offers a nice offer to his customers: “Free pickles, with the purchase of the stick!”

This promotion mocked another common type of gift: the gift with purchase. For example, if you buy skin care products for $ 50 at the cosmetics counter of a department store, the store might include a tube of lipstick as a bonus. However, like my friend’s pickles, this gift isn’t exactly free; It comes on condition that you spend a certain amount on a specific type of product.

It doesn’t necessarily mean it’s a bad deal. If you really want the skin care items and are willing to pay $ 50 for them, getting a tube of lipstick is just a nice bonus. But if the main reason you buy $ 50 worth of skin care products is to get the “free” lipstick, you’d better buy the lipstick itself. It would almost certainly cost less, and it doesn’t require you to use multiple bottles of face cream that you don’t really want.

Another type of gift offered with your purchase is store credit that will be used towards a future purchase. For example, suppose a clothing store has a special offer: if you buy clothes worth $ 50, you will get a gift card worth $ 10 on your next purchase. In fact, you need a pair of jeans that cost $ 50, so you think you can buy them now for the $ 10 credit as well.

The problem is, the gift card has an expiration date, and if you don’t use it in two months, your credit will be gone. You hate to let that $ 10 credit go to waste, so you go back to the store and buy a $ 25 shirt that you don’t really need. Even with your $ 10 credit, you spent $ 15 more than expected.

To avoid falling for a gift offer with purchase, visualize everything as a package. If you think the skin care products and lipstick, taken together, are a steal at $ 50, go ahead and make the purchase. Likewise, if the new shirt isn’t something you would pay $ 25 for, but think it’s worth $ 15, then it’s a great way to use your $ 10 credit. Don’t spend too much just to get a free gift. or a credit note in store.

Avoid the free trap

The main thing to remember about “free” offers is that there is almost always a catch. The gift is the bait, but there will surely be a hook.

In some cases, it may turn out that the seller is making money in a way that doesn’t really hurt them. For example, a warehouse store that offers free samples of their products in the store hopes that you are inspired to buy them, but they can’t really force you to do so. Likewise, a free ad-supported media streaming subscription is no problem if certain advertisements don’t bother you with your TV shows. But you can’t be sure that a gift is truly free unless you take the time to check it out from all angles.

Here are some specific precautions to take whenever someone gives you something for free:

  • Read the fine print. Before signing up for an offer, make sure you know exactly what you are agreeing to. Specifically, check if you accept a type of service or regular delivery of a product. If so, make sure you know how to unsubscribe before you get charged. If you are not sure if you can cancel later, please do not register.
  • Do the math. Calculate the actual cost of the “free” item. If this is a gift with purchase, look at the cost of the item you must purchase to get the gift, and if it’s a mail order offer, look at the shipping costs. Add up the total amount, then ask yourself if you would be willing to buy the item at that price. By substituting the word “free” for the actual price, you can rationally consider the offer.
  • Watch out for extras. If you are signing up for an online giveaway, keep your eyes peeled during the checkout process. Some websites require you to browse additional offer pages before confirming your order for the free item. In some cases, the “yes” box for these offers is checked by default, so if you just clicked without looking, you will be signing up for dozens of additional products or services. Read all the pages carefully and uncheck the boxes so you don’t end up with the extras you don’t want.
  • Protect your personal information. Sometimes when you sign up for a free trial or other giveaway, you need to provide your personal information, such as your mailing address, email, or phone number. Before submitting any information, make sure you know how the company intends to use it. In some cases, accepting the offer automatically registers you to receive catalogs, promotional emails, or telemarketing calls, perhaps from a single company, or perhaps all of their partners as well. So if you don’t want to deal with a flood of messages, don’t give out your personal information unless you are sure it won’t be used to send spam.
  • Use cards with care. Other free trial and mail order offers require that you provide a credit or debit card number that the business can use for billing. Once the business has your card number, you can continue billing month after month, and canceling isn’t always easy. One way to protect yourself is to use a prepaid card with limited funds, so even if the company continues to charge you, you can only charge a limited amount. Or, if you have a credit card that allows you to generate a unique “virtual account number”, you can enter that number instead, and the company won’t be able to charge you at all.

Last word

As Dan Ariely’s research research, the mere act of seeing the word “free” to trick people into making irrational decisions that should pass their best interests. The key to avoiding so-called free offer units is to focus on the real cost – whether it’s shipping charges for a sample, spam in your inbox, or advertisements on your web browser. If you consider that you have reels, you will enter a decision plus a set.

What are some examples of free things that have a hidden cost?

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