Monthly or yearly: when the annual plan is worth it

Most subscriptions offer a deal: pay for a year up front, and it costs less than paying month by month. The discount is real. Whether it is a saving depends on one thing only, which is how long you would actually have kept paying.

The discount, in numbers

Take a service that costs $9.99 a month, or $79.99 a year.

• Twelve months at $9.99 comes to $119.88.
• The yearly plan is $79.99, which saves $39.89, about a third.

Find the break-even month

Divide the yearly price by the monthly one:

$79.99 ÷ $9.99 ≈ 8

That is how many months of monthly payments the yearly plan is worth. If you would keep the service for eight months or more, the yearly plan wins. If you would have cancelled after three, you would have paid $29.97 month by month, and the “saving” would have cost you $50.02.

The catch with paying up front

A yearly plan trades flexibility for the discount:

• The money leaves all at once. One charge of $79.99 lands harder than $9.99 does.
• Stopping early rarely gives anything back. Cancelling a yearly plan usually just stops it renewing. A refund for the months you did not use is the exception, not the rule.
• The renewal is a year away. By the time it comes round, the date has long been forgotten, and maybe the price too. A yearly renewal is the one most worth a reminder.

A good rule: start monthly while you find out whether you really use something, and switch to yearly once it has earned its place.

Comparing plans in Blips

Blips handles every common billing cycle, from daily and weekly through quarterly and twice a year to yearly. Any subscription can be shown as billed, or as a per-month or per-year estimate, so a yearly plan and a monthly one sit side by side on the same terms.

And since Blips reminds you before each renewal, the yearly one does not slip past you twelve months from now.