Beware of Automatic Bill Payments

By Larry Kahaner

Credit card companies and banks will hate me for saying this but automatic bill payments are bad for you.flying money

Although touted for their simplicity and convenience, having your bills paid without you lifting finger can be more trouble than it’s worth. At least that’s been my experience.

Here is one personal story: My son was taking karate lessons after school and the proprietor asked us to pay by credit card so the payments would be made every month automatically. Okay, no problem until my son no longer wanted to attend and no matter how many phone calls or emails we made, the karate guy kept nicking our account. He promised to stop the automatic payments but never did. We called the credit card company and they suggested that we keep asking him to stop the payments as they gave us credits for the four month of payments that he owed us. The karate guy still didn’t respond.

Finally, the credit card company took action and stopped the automatic payments, gave us additional credit and told us that they would do a review of the merchant’s status. Presumably, they threatened to cut him off if he continued to do these kinds of things, which, according to person I spoke too on the phone, is more common then you may think.

Another story: I bought an line an anti-virus software that I could download to my computer. I set it up as a yearly automatic charge. About half way into the year, I decided I no longer wanted the software and I informed the company. I didn’t expect my money back, but I did expect the software company to stop the automatic payment for the following year. They did not. I could not get them on the phone nor would they answer my emails. Suffice it to say that they are a reputable company, you’ve heard their name, but they were unwilling or unable to do what I asked.

Because I am a long-time credit card customer, the card company gave me instant credit (it was $49.95) and said they would pursue the matter on their end. We’ll see what happens when subscription time rolls around again.

My advice is to keep away from automatic bill payments either with your credit card or your bank account. Don’t get me wrong. I’m not saying to pay by paper check (unless you like that sort of thing). In fact, I prefer  paying my bills online through my bank’s website, but I don’t use their automatic payments option.

Other than the headaches I encountered, here are three more reasons not to sign up for automatic bill payments.

First, if your bill is wrong, you have less leverage to fix the issue. The vendor already has your money. If it turns out that it’s their mistake, and they credit your account, you may not have use of your money because the overage probably will be applied to your next bill. Utility companies do this a lot. Will they send you a check instead? Sure, but it could several weeks.

Second, with automatic bill payments you don’t have control of your budget. Payments are sent on the vendor’s schedule not yours. What if you’re short one month and don’t want to pay the full amount of your bill or you want to pay a few days late and are willing to accept a late fee? With auto-pay, you don’t have these options.

Third, you are less likely to check your bills for accuracy if you have auto-pay. Out of sight, out of mind.

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