Autopay: Don’t Just ‘Set It and Forget It’
Autopaying bills is a no-brainer. You are never late with a payment, and you do not have to spend all that time going through stacks of bills, filling out checks and then stuffing and stamping envelopes.
But Brent Cumberford learned the hard way that automatic bill paying is not as simple as setting it up and walking away. Last year, his natural gas was turned off because expected automated payments weren’t made, a canceled subscription kept getting paid and another canceled service automatically renewed itself.
Cumberford, 32, who runs the personal finance site Vosa and splits his time between San Diego and Calgary, Alberta, resolved the natural gas situation without figuring out what exactly went wrong — the bank and the utility blamed each other — and got the automatic renewal credited back. But he is still dealing with the subscription. “The lesson I learned was that it’s important to still track automated payments.”
About 61 percent of Americans have set at least one bill to pay automatically, says Eric Leiserson, a senior research analyst for financial technology services company Fiserv (FISV). The main reason consumers use autopay is to make sure bills are paid on time. That is vital to their credit scores when it comes to debts like car loans, credit card balances and mortgages, but most other on-time payments aren’t recorded.
A recent study by credit reporting firm Experian, however, suggests that including positive utility payment histories, which isn’t commonly done, could help elevate the credit scores of millions of Americans. The report also says people with thin credit histories would benefit from having a richer record of payments made.
As much as automation can be a positive, there are plenty of catches to be watch out for:
- Changing Accounts. If you decide to pay from a different account, be sure all the changes are in place. Marketing consultant Peter Brooks, 56, of Vallejo, California, says it was a big hassle to re-enter all the payment information after he changed checking accounts.
- Being Short Of Funds When Bills Are Paid. Not having enough money in the bank is a main reason not to automate bill paying. If you have a bill set up to pay automatically and you lack money to pay it, this could affect your credit history as much as forgetting to mail in the check. Being on time 99 percent of the time doesn’t help you much, but missing one payment could hurt your credit score for years.
- Continued Withdrawals Even If You Stop Using The Service. Monthly recurring charges for services can keep occurring even if you asked for them to stop. A gym membership or subscription set to be paid automatically every month could lag a request to cancel. So it is vital to keep an eye out to see if withdrawals persist after you have canceled a service, experts say.
- Inadvertently Disengaging The Automated Payments By Making One Manually. Bob Girolamo, 41, of Chicago, who runs the startup data and statistics organizer Sorc’d, learned that the hard way. He says he made a manual payment for his health insurance that disengaged the autopay. He didn’t notice the missed payments until he received the cancellation notice.
- Errant Payments. Monitoring transactions is key to fixing errors. Greg McBride, chief financial analyst for Bankrate.com, says putting payment dates in an online calendar is one way to stay on top of what payments should be going out. “With 24/7 online and mobile account access, keeping tabs on your account is easier than ever,” he says. “Taking a matter of seconds each day is all it takes.”
Source; Daily Finance
