Thursday, September 27, 2012

T-Mobile Teaches Me a Lesson in Behavioral Economics

I have learned about the power of inertia the hard way.  I often travel abroad so when I travel to exotic places I call up my cell phone carrier (T-Mobile) to place me on the international rate category.  I always tell them the dates when I'm leaving the USA and returning home.  I had assumed that my cell phone company would start my international rate when I leave and end it when I return.  This assumption turns out to be false. T-Mobile earns more $ from me (roughly $20 a month) when I'm on the international rate and once I was on it, this company was happy to keep me on that rate.  I had falsely assumed that this company switches me off the plan when I return to the U.S (and they know the date I return and I'm 99% sure I told them to stop the plan when I returned).  I pay my bill using direct pay but in the monthly statement, I saw that my monthly bill was roughly $20 more than what I expect but until I called T-Mobile I didn't connect the dots concerning my being billed for the International deal when I was in the USA.

So, the interesting point here isn't that I'm a sucker.  The more interesting point is that there is a synergy between "direct pay" and the "opt out".   Since I wasn't writing a check each month, I didn't give much thought to really itemizing my cell phone bill and my International Plan was an explicit  "opt out".  How much windfall profit does T-Mobile earn from such hustles?   What other examples exist of this being billed for services we don't need in a user friendly way that doesn't draw explicit attention to it?

I am a victim.  Will Elizabeth Warren protect me?