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 Inc. The main reason consumers use autopay is to make sure bills are paid on time. As much as automation can be a positive, there are plenty of catches to watch out for:
Changing accounts
If you decide to pay from a different account, be sure all the changes are in place. It can be a big hassle to re-enter all the payment information after you change checking accounts.
Being short of funds when bills are paid
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 does not 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
Bob Girolamo, 41, of Chicago, who runs the start-up data and statistics organizer Sorcd.com, learned that the hard way. He says he made a manual payment for his health insurance that disengaged the autopay. He did not 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."
