Apple App Store billing policy can lead to overdraft fees, budget woes

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For many purchases, once you swipe your debit or credit card or click “buy now,” that transaction swiftly shows up as pending on your account. But that’s not always the case if you’re shopping in Apple’s App Store. 

Apple is known to do something called “bundled billing,” where it groups purchases made within a certain period into a single charge. 

The tech giant has used the practice since the early days of the iTunes Music Store in 2003, and it often means users can purchase apps, subscriptions, books and music without having the funds charged to their account until several days later.

It may seem like a small difference in timing, but Apple’s practice of delaying and combining charges can lead some consumers to face budgeting challenges and hefty overdraft fees as they grapple with the unpredictability of when expenses will hit their accounts. 

“It doesn’t make any sense,” said developer David Barnard, growth advocate for RevenueCat, which makes a tool to automate Apple’s billing on the developer side. Barnard has also experienced the delay with some of his own App Store purchases. 

“In modern times, where you purchase something online and you get an email receipt within seconds, it’s a bizarre practice,” he said.

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Longtime Apple user Savannah Moore, 35, of Buena Vista, Colorado, told CNBC the bundling affected her less when she worked full-time and generated more income. But now that she’s on disability and only gets paid once a month, she said not knowing when she’ll be billed makes it harder to plan. 

Apple recently billed Moore a total of $15.98 for two separate transactions, a subscription and an in-app purchase, causing her to be charged three days after purchase for the subscription and two days after the in-app purchase.

With the delayed charges, she said she is often misled by her account balance and has incurred overdraft fees on multiple occasions. 

“I go out with my friends, buy a cheap drink and get a taco,” she said, recounting an experience. “I wake up the next morning and my account bounced because the taco was charged by the person I bought it from that night … but Apple didn’t charge what they were supposed to charge [days earlier], until also that night.”

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A spokesperson at Merchant Advisory Group, which works with more than 150 merchants across the U.S., said it’s not unusual for businesses to develop systems that help them minimize the transaction costs imposed by card networks. Starbucks, for instance, has a rewards program that incentivizes customers who pay with a Starbucks gift card by awarding two “stars” for every $1 spent, as opposed to one star if they were to pay with a credit or debit card. 

“It’s really the same process, just a different way of making that process work.”

That said, Apple’s practice is unique among major app stores.

Asked about the practice, an Apple spokesperson told CNBC in an emailed statement that the company sometimes bundles multiple purchases and subscriptions into one bill for the convenience of its customers, and sends a single email receipt instead of an individual email for every purchase a customer makes. It also notes the practice on its website in the support section on how to confirm billing charges.

Apple did not respond to follow-up requests to clarify how it determines the duration of a delayed charge and when it decides to group purchases.

Meanwhile, Google Play does not bundle, a company spokesperson told CNBC. Its website says that customers are charged “shortly” after purchasing content and will receive a confirmation email with their order information. 

An Amazon spokesperson said purchases on Amazon Appstore are treated separately and a “separate clear” notification is sent to the customer for each charge.

Bundling charges can cut ‘swipe fees’

There are likely financial advantages for Apple in bundling and delaying charges, some experts say.

Businesses have to pay a per-transaction fee — or “swipe fee” — each time they process an electronic payment. The swipe fee is typically a percentage of the transaction amount plus a fixed fee. Credit card swipe fees average 2.24% but can be as high as 4%, according to the Merchants Payment Coalition. The Federal Reserve capped debit card fees at 21 cents plus 0.05% of the transaction. 

By delaying a charge so it can be grouped with other purchases, Apple may be able to retain a larger profit margin.

Delayed and bundled charges were more comprehensible in the early days of the iTunes Music Store because charging a customer each time they purchased a $0.99 song would have been coupled with steep interchange fees, said Barnard, the developer. But the practice made less sense with the emergence of the App Store in 2008.

When we swipe our credit card or make a purchase, we’re happy. We enjoy buying stuff, we just don’t like seeing the transaction.

Michael Barbera

Chief behavioral officer at Clicksuasion Labs

Bundling could have cost-cutting perks for the customer, said Lawrence Sprung, a certified financial planner and the founder of Mitlin Financial in Hauppauge, New York.

Since Apple can save on transaction fees by grouping purchases, he said it’s also likely that customers can pay less for those purchases.

“If the company can keep their cost down, then the hope is that they’ll keep the cost down for the consumer,” Sprung said.

An illusion of spending less money less often

When a customer isn’t billed immediately after a purchase, it can drive them to make more purchases, according to psychology experts.

Bundled billing can reduce “pain of paying,” which refers to the negative emotions people experience when paying for goods or services, said consumer psychologist Michael Barbera, chief behavioral officer at Clicksuasion Labs. If a customer receives a receipt or notification after every purchase they make, they’ll be less likely to spend money in the future.  

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“When we swipe our credit card or make a purchase, we’re happy,” Barbera said. “We enjoy buying stuff, we just don’t like seeing the transaction.”

So, when customers can indulge in an app or service without being billed on the spot, they’re more likely to associate their interactions with Apple as experiential rather than transactional, said Barbera — and that positively influences consumer behavior.

The practice of bundling charges and the lack of clarity on how the policy is executed create the illusion that customers are spending less money less often, said Avigail Lev, a clinical psychologist and consultant based in San Francisco.

That can lead to overspending — especially for people who aren’t the best at tracking expenses.

At some point, we kind of have to say, ‘Hey, I’m an adult. I know I’m spending this money, I need to keep track of it.’

Taylor Kovar, CFP

CEO and founder of Kovar Wealth Management

The financial consequences of bundled billing may also disproportionately affect people who live paycheck to paycheck, said behavioral scientist Piyush Tantia, chief innovation officer at Ideas42. Those individuals tend to have volatile income and expenses that make it difficult for them to track their finances thoroughly. 

“They’re not accounting for that charge hitting later, and they may spend [the money] on something else in the meantime and then end up with hefty fees,” Tantia said. “For someone who’s already tight on finances, that extra fee is very, very painful.”

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As Apple user Moore discovered, bundled billing can be more problematic for shoppers using debit cards. After the Consumer Financial Protection Bureau began scrutinizing banking fees, some banks have eliminated overdrafts or implemented more consumer-friendly policies. Even so, the average overdraft fee is $26.61 and can be as high as $38, according to recent data from Bankrate. 

Certified financial planner Taylor Kovar, CEO and founder of Kovar Wealth Management in Lufkin, Texas, said Apple’s delayed billing has affected some of his clients. Although it would be ideal for customers to know when they will be charged — as they do for many recurring bills such as utilities or student loans — he said, it’s still important for them to take responsibility for their purchases.

“At some point, we kind of have to say, ‘Hey, I’m an adult. I know I’m spending this money, I need to keep track of it,'” Kovar said. 

With technological advancements, Kovar said, consumers should take advantage of free budgeting apps that allow them to set up alerts and track where their money is going. He also said it’s safer to charge Apple App Store purchases to a credit card instead of a debit card because it protects against fraud and overdraft fees.

It’s not common for people to buy something and immediately check their bank accounts to see if the charge is posted, said behavioral scientist Michael Liersch, head of advice and planning for Wells Fargo Wealth and Investment Management. People tend to keep a “mental account” of their money as it comes in and goes out, and check in on it sporadically.

Due to this, he said, the delayed charges can affect people differently based on how often they engage with their finances.

“When you think of general consumer behavior, it’s not uncommon for people to look at that information possibly once a month,” Liersch said. “It’s much less usual for someone to look at it moment to moment or daily.”

For people to maintain agency over their finances with delayed billing, Liersch said it’s critical for them to focus on how much money they have available to spend on a daily, weekly and monthly basis.

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