Millions of Americans pay for Netflix, doling out anywhere from $6.99 to $22.99 a month. It’s a common belief that you can get out of recurring charges like this by canceling your credit card. Netflix won’t be able to find you, and your account will just go away, right? You wouldn’t be crazy for believing it, but it’s a myth that canceling a credit card will stop your recurring charges.
Nearly 46% of Americans opened a new credit card last year, according to Forbes, which means millions of Americans also canceled old ones. When you switch cards, Netflix doesn’t just stop your service — they just start charging your new card. There’s a largely hidden service that enables Netflix and most other subscription services to keep throwing charges at you indefinitely.
“Banks may automatically update credit or debit card numbers when a new card is issued. This update allows your card to continue to be charged, even if it’s expired,” Netflix says in its help center.
You can thank Visa for this. In 2003, Visa U.S.A. started offering a new software product to merchants called Visa Account Updater (VAU), according to a 2003 American Banker article. The service works with a network of banks to create a virtual tracking service of Americans’ financial profiles. Whenever someone renews, cancels, or opens a credit card, banks automatically update the VAU. This system lets Netflix and countless other corporations charge whatever card you have on file. It’s a seamless switch that allows the dollars to keep flowing toward corporate America, while you don’t have to lift a finger.
“Visa understands the challenges faced by merchants when it comes to staying on top of account information changes,” Visa say in marketing materials to corporations. “VAU delivers updated cardholder account information in a timely, efficient, and cost-effective manner, benefiting all parties involved in the electronic payment process.”
VAU was an instant success, quickly adopted by banks and corporations around the world. Visa says its service follows you when switching between any major credit card provider, whether it’s Discover, Mastercard, or American Express. Some customers of Visa’s tracking service include Netflix, Amazon, Facebook, Google, and Disney, according to a 256-page list of the software’s adopters from 2022. VAU allows merchants to keep customers roped into their subscription services, but Visa also argues it helps customers.
“Outdated account-on-file information can lead to declined transactions and cardholder inconvenience—and ultimately introduce the risks of service cancellation and customer dissatisfaction,” Visa said in marketing materials.
Visa’s not entirely wrong about this. If your electricity or internet bill is tied to your credit card, you could be in a real bind if you forget to update your new card. However, practices like these can also keep people bound in endless cycles of payments that follow them everywhere.
Visa did not respond to Gizmodo’s request for comment.
Origins of the Myth
Before services like VAU popped up, switching your credit card was a pretty surefire way to get out of recurring charges, whether you wanted to or not. When Bank of America adopted VAU in 2003, it described the product as a solution for billing changes that had once left merchants with “unappealing choices.”
“One would be that the merchant would shut off the customer’s service,” said a Bank of America executive in a 2003 press release. “Another would be that the merchant would continue the service but send the customer a nasty letter.”
So VAU really came about with the onset of the internet. Practices like this have become increasingly popular in the Internet age. Subscription services have become easier to start, but increasingly difficult to stop. Recurring charges can truly follow you to the ends of the Earth unless you outright contact the company to stop them.
Why It’s Pervasive
Visa’s Account Updater is only really marketed to businesses, so most consumers have no idea it exists. I’d bet most people have no idea there’s a way to opt out of Visa’s credit card tracking service, and even fewer know they’re default opted in. It’s largely a hidden service to the average person, with no clear indicator from your bank or subscription service that you’re being tracked in this way.
Credit cards are also widely regarded as a more anonymous way to move through the financial world. While they typically are more secure than using a debit card, make no mistake, banks are still tracking your every move. The VAU just allows them to coordinate with corporations to keep your financial information constantly up to date.
The VAU undoubtedly offers some benefits to consumers. However, it’s important to understand why. The system reduces “churn” for corporations, and ensures you can keep paying them your dollars no matter what’s going on in your financial world. Banks make it effortless to keep paying these recurring charges. However, stopping them can be much harder. If you really want to stop a subscription, there’s still no substitute for calling up the company and canceling.
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